What rule does the make or buy decision follow?

What rule does the make or buy decision follow?

The make or buy decision involves whether to manufacture a product in-house or to purchase it from a third party. The outcome of this analysis should be a decision that maximizes the long-term financial outcome for a company.

What are the reasons behind make or buy decisions?

Make-or-buy decisions usually arise when a firm that has developed a product or part—or significantly modified a product or part—is having trouble with current suppliers, or has diminishing capacity or changing demand.

What does special order mean?

A special order is an extra order or an order for an item specially requested by a customer. If the item is not one you normally carry, can you send a special order to the supplier?

What are the relevant costs in 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 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 one of the following is correct regarding a relevant range?

Answer (B) is correct. The relevant range is the range of activity over which unit variable costs and total fixed costs are constant. The incremental cost of one additional unit of production will be equal to the variable cost.

What data are relevant in deciding whether to accept an order at a special price?

The relevant information in accepting an order at a special price is the difference between the variable manufacturing costs to produce the special order and expected revenues. Any changes in fixed costs, opportunity cost, or other incremental costs or savings (such as additional shipping) should be considered.

Which of the following are factors to consider when deciding whether to accept a special order?

When deciding whether to accept a special order, management must consider several factors:

  • The capacity required to fulfill the special order.
  • Whether the price offered by the buyer will cover the cost of producing the products.
  • The role of fixed costs in the analysis.
  • Qualitative factors.

How are allocated joint costs treated when making a sell or process further decision?

How are allocated joint costs treated when making a sell-or-process-further decision? They are allocated to the individual products. This is done based on the relative salves value of the joint products. It is irrelevant for any sell-or-process-further decisions because the joint product cost are sunk cost.

When deciding whether to accept a special order which of the following is irrelevant?

This preview shows page 3 – 6 out of 12 pages. When deciding whether to accept a special order, we should compare the extra revenues we will receive against the extra costs we will incur to fill the order. Costs that we will incur whether or not we fill the order are irrelevant to our decision.

When a product is past the split off point but is not yet a finished product it is called a n?

Intermediate Product. A product that is past the split off point, but is not yet a finished product.

Which of the following is a cost that does not differ between decisions?

Unavoidable cost

What are qualitative factors in decision making?

Qualitative factors are decision outcomes that cannot be measured….Examples of qualitative factors are:

  • Morale. The impact on employee morale of adding a break room to the production area.
  • Customers.
  • Investors.
  • Community.
  • Products.

What are quantitative and qualitative factors in decision making?

Quantitative decisions are mostly based on statistical analysis of collected data whereas qualitative decisions are based on many algorithms like type and quality of data, factors that influence collected data, risk assessments etc.

Why are qualitative factors important in decision making?

Decisions based in part on qualitative factors are relevant, even though you can’t tie specific cost or revenue numbers to them. They can have a long-term impact on profitability, so you need to consider them. Qualitative factors should always be considered before making any business decisions.

What are the 9 quantitative approaches to decision making?

Quantitative Techniques in Decision Making | Management

  • Technique # 1. Mathematical Programming:
  • Technique # 3. Cost-Benefit Analysis:
  • Technique # 4. Linear Programming:
  • Technique # 5. Capital Budgeting:
  • Technique # 7. Expected Value:
  • Technique # 9. Simulation:
  • Technique # 12. Information Theory:
  • Technique # 13. Preference Theory/Utility Theory:

What are the different kinds of managerial decisions?

Some of the important types of managerial decisions are as follows:

  • Individual and Group Decisions.
  • Routine (Tactical) and Basic (Strategic) Decisions.
  • Programmed and Non-programmed Decisions.
  • Major and Minor Decisions.
  • Organizational and Personal Decisions.
  • Policy and Operating Decisions.
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