- 1 What are three factors that can be considered in the make-or-buy process?
- 2 What rule does the make-or-buy decision follow?
- 3 Which of the following does not affect buy decision?
- 4 What do you mean by make or buy decision?
- 5 What are the qualitative factors that should be considered in buy or make decisions?
- 6 Which of the following is an example of sunk cost?
- 7 When should a special order be accepted?
- 8 What is special order decision?
- 9 Why might a company make a product in house rather than buy it?
- 10 Which cost help in taking make or buy decision?
- 11 When opportunity costs exist they are always relevant?
- 12 Which is the first step in the management decision making process?
- 13 What is not relevant in a make or buy decision?
What are three factors that can be considered in the make-or-buy process?
The decision as to whether to make vs. buy a product is based on a variety of factors, including the cost of either option, whether the product is available from other vendors, the expertise and resources your business has when it comes to manufacturing, and whether you have enough cash in place to make a purchase.
What rule does the make-or-buy decision follow?
The make-or-buy decision compares the costs and benefits that accrue by producing a good or service internally against the costs and benefits that result from subcontracting.
Which of the following does not affect buy decision?
Which of the following will not affect a make-or-buy decision? Differential fixed costs. In a make or buy decision, opportunity costs are: added to the make total cost.
What do you mean by make or buy decision?
A make-or-buy decision is an act of choosing between manufacturing a product in-house or purchasing it from an external supplier. Make-or-buy decisions, like outsourcing decisions, speak to a comparison of the costs and advantages of producing in-house versus buying it elsewhere.
What are the qualitative factors that should be considered in buy or make decisions?
Examples of qualitative factors include the reputation and reliability of the suppliers, the long-term outlook regarding production or purchasing the product, and the possibility of changing or altering the decision in the future and the likelihood of changing or reversing the decision at a future date.
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.
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.
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.
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 cost help in taking make or buy decision?
Make or buy decision is the production decision made by the company i.e whether to buy the product or to manufacture the product. The cost of buying and manufacturing are both taking into consideration while making the decision. Hence, the cost of production is considered for ‘make or buy’ decision.
When opportunity costs exist they are always relevant?
When opportunity costs exist, they are always relevant. When capacity is constrained, relevant costs equal incremental costs plus opportunity costs. If the $20,000 spent to purchase inventory could be invested an earn interest of $500, then the opportunity cost of holding inventory is $20,000.
Which is the first step in the management decision making process?
The first step in making the right decision is recognizing the problem or opportunity and deciding to address it. Determine why this decision will make a difference to your customers or fellow employees.
What is not relevant in a make or buy decision?
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.