Make Or Buy Decision Questions And Answers Pdf

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A make-or-buy decision is an act of choosing between manufacturing a product in-house or purchasing it from an external supplier. Also referred to as an outsourcing decision, a make-or-buy decision compares the costs and benefits associated with producing a necessary good or service internally to the costs and benefits involved in hiring an outside supplier for the resources in question.

If an organization is already manufacturing the entire product internally without involving any outside contractor, why should it outsource any of its business processes? Organizations need to weigh the short-term financial impact of outsourcing against the long term consequences. Any cost that does not change as a result of the decision should be ignored such as depreciation and indirect fixed costs. Once we sort out the relevant costs in the make-or-buy decision, we need to find which option minimizes the total cost. The approach to finding the optimum solution in an outsourcing problem depends on the number of limiting factors.

Make-or-Buy Decisions

A matter is relevant if there is a change in cash flow that is caused by the decision. Banks record cash so this test is reliable. Sunk, or past, costs are monies already spent or money that is already contracted to be spent. A decision on whether or not a new endeavour is started will have no effect on this cash flow, so sunk costs cannot be relevant. Committed costs are costs that would be incurred in the future but they cannot be avoided because the company has already committed to them through another decision which has been made. For example, if a company has two year lease for piece of machinery, that cost will not be relevant to a decision on whether to use that machinery on a new project which will last for the next month.

Are you outsourcing enough? This was one of the main questions asked by management consultants during the outsourcing boom. Outsourcing was viewed as one of the best ways of getting things done for a fraction of the original cost. Outsourcing is closely related to make or buy decision. The corporations made decisions on what to make internally and what to buy from outside in order to maximize the profit margins. As a result of this, the organizational functions were divided into segments and some of those functions were outsourced to expert companies, who can do the same job for much less cost. Make or buy decision is always a valid concept in business.

The Make or Buy Decision

Question: With the differential analysis format in hand, we can now go back to Best Boards, Inc. What information should Amy provide that will help management make this decision? Answer: Table 7. This is called a make-or-buy decision because the company must decide whether to make the product internally or buy the product from an outside firm often called outsourcing. Question: What information did Amy find to help Best Boards with the decision whether to make their own wakeboards or buy them from an outside supplier?

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Make-or-Buy Decisions

This chapter will focus on a number of short-term decisions that are typically made by a business:. Each of these decisions is based on relevant costing principles. Therefore, a recap of relevant costing will be useful before looking ateach of the decisions in turn. Decision making involves making a choice between two or morealternatives.

Sometimes businesses encounter a situation where they have to decide between making a particular product themselves or to buy it from an outside supplier. The decision is based on both financial and non-financial factors.

Why Outsource?

These days companies manufacture a lot of product varieties. Each product requires multiple parts to be created. Manufacturers can produce such parts themselves or they can buy them. Of course, the choice of producing parts or buying them includes various aspects and one of them is cost. In this article, we will discuss make or buy decisions. The essence of a make or buy decision is to manufacture a product if it costs less than to buy it; and vise versa, to buy the product if doing so will cost less. Costs are compared for both make and buy options and the one with the lower total cost is chosen note: there are other factors to be considered besides cost; however, for the purpose of this discussion we will assume that only the cost factor should be analyzed.

A complete or accept decision can be made using quantitative or qualitative research and most of the time, the results of quantitative analysis cost-benefit analysis are enough to decide on whether to make the product in-house or buy outsource from outside suppliers. The decision applies to both goods and services. Businesses compare the cost and benefits of producing the goods or services within the company and the cost and benefits of getting an outside supplier to supply the goods and services into consideration. The value here must include all the fees associated with manufacturing including material, labor, cost of machinery and space , storing, moving, taxes, etc. Hence it is economical to make it.

Ей казалось, что пар буквально выталкивает ее наверх, через аварийный люк. Оказавшись наконец в шифровалке, Сьюзан почувствовала, как на нее волнами накатывает прохладный воздух. Ее белая блузка промокла насквозь и прилипла к телу. Было темно. Сьюзан остановилась, собираясь с духом. Звук выстрела продолжал звучать у нее в голове. Горячий пар пробивался через люк подобно вулканическим газам, предшествующим извержению.

Chapter 5: Make or buy and other short-term decisions

 - Он пожал ее руку. - Примите мои поздравления, мистер Беккер. Мне сказали, что вы сегодня отличились.

 - Здесь есть кто-нибудь? - Он вошел. Похоже, никого. Пожав плечами, он подошел к раковине. Раковина была очень грязной, но вода оказалась холодной, и это было приятно.

Chapter 5: Make or buy and other short-term decisions

 El anillo. Внезапно Беккера охватило чувство, которого он никогда прежде не испытывал. Словно по сигналу, поданному инстинктом выживания, все мышцы его тела моментально напряглись. Он взмыл в воздух в тот момент, когда раздался выстрел, и упал прямо на Меган.

Ты раньше говорил что-то про вирус. - Черт возьми, Мидж! - взорвался Джабба.  - Я сказал, что вируса в шифровалке. Тебе надо лечиться от паранойи. В трубке повисло молчание.

Make-or-Buy Decision

 - Парень снова сплюнул.  - Поэтому все его последователи, достойные этого названия, соорудили себе точно такие .

Немедленно. Но Дэвид знал, что никогда ей этого не откроет. Секрет выражения без воска был ему слишком дорог.

Он проявил редкую наблюдательность. - Но ведь вы ищете ключ к шифру, а не ювелирное изделие. - Конечно. Но я думаю, что одно с другим может быть связано самым непосредственным образом.

Make or Buy Decision


1 Response
  1. Quintilian C.

    Cardo wants to develop a model for make-or-buy decisions. Therefore In each phase, the different methods to be able answer the questions.

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