Readers ask: In A Make-or-buy Decision For A Part For A Product, Which Of The Following?

What are the factors to be considered in the make-or-buy decisions?

Factors Influencing Make or Buy Decision:

  • Volume of Production:
  • Cost Analysis:
  • Utilization of Production Capacity:
  • Integration of Production System:
  • Availability of Manpower:
  • Secrecy or Protection of Patent Right:
  • Fixed Cost:
  • Availability of competent suppliers or vendors.

Which of the following costs are relevant to a make-or-buy decision?

Examples of relevant costs in the context of a make or buy decision include direct labor, direct materials, variable overhead. Other costs that should be considered in this category are any incremental costs necessary for a part manufacturing.

What is the first step to making a make-or-buy decision?

They proposed a make-or-buy decision process methodology through the following stages: planning, evaluation, internal costs, and performance analysis. Companies can perform their freight distribution in three different ways.

When should a special order be accepted?

A special order generally should be accepted if: A) its revenue exceeds allocated fixed costs, regardless of the variable costs associated with the order.

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What to consider when buying products?

5 Factors Consumers Consider When Choosing Your Product

  • Package Reusability. Consumers have always wanted more for their money, but modern consumers want environmental responsibility for their money, as well.
  • Product Allure. Make the product look good.
  • Familiarity.
  • Snobocity.
  • Brand Trustworthiness.

Which of the following is an example of sunk cost?

A sunk cost refers to a cost that has already occurred and has no potential for recovery in the future. For example, your rent, marketing campaign expenses or money spent on new equipment can be considered sunk costs. A sunk cost can also be referred to as a past cost.

Why might a company make a product in house rather than buy it?

There are several reasons to manufacture in-house instead of outsourcing production. It gives your company a lot flexibility to alter the product as you produce it. In-house production ensures higher quality control. With production in-house, you can keep your overhead low by avoiding foreign managers.

Which of the following costs are always irrelevant in decision making?

Sunk costs are those costs that happened and there is not one thing we can do about it. These costs are never relevant in our decision making process because they already happened! These costs are never a differential cost, meaning, they are always irrelevant.

What is special order decision?

Special-order decisions involve situations in which management must decide whether to accept unusual customer orders. These orders typically require special processing or involve a request for a low price.

Which items are excluded from cost sheet?

Items Excluded from Cost Accounts

  • Items of Appropriation of Profit. (a) Income tax paid and legal expenses incurred in connection with the assessment of income tax. (b) Transfer to reserves.
  • Items of Pure Finance. (a) Interest and dividends received on investments.
  • Abnormal items. (a) Cost of abnormal idle time.
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What are the advantages of decision making?

Advantages and Disadvantages of Decision Making

  • Gives more information.
  • Increase people’s participation.
  • Provide more alternatives.
  • Improves the degree of acceptance and commitment.
  • Improves the quality of decisions.
  • Helps in strengthening the organisation.

How do relevant costs impact a make-or-buy situation?

Quantitative Analysis Make-or-buy decisions must be based on the relevant cost of each option. Relevant costs in make-or-buy decisions include all incremental cash flows. Any cost that does not change as a result of the decision should be ignored such as depreciation and indirect fixed costs.

What are the major trade offs in a make-or-buy decision?

Dabhilkar (2011) points out that there are trade-offs in ‘make or buy’ decision-making regarding their main reasons ( costs, quality, core activity focus, flexibility, and innovation ) that often conflict and imply that a company cannot have all these reasons when outsourcing an activity.

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