The make-or-buy decision typically would include considerations about
a.profit margins as a result of vendor-managed inventory
b.consignment time limitations
c.total ownership costs
d.cross-docking capabilities. at supplier sites
Correct Answer:
C
Make or buy decision relies on the total cost incurred to produced the goods. If cost is lower with the make than buy decision, then company decides to make, otherwise it goes for the buy decision.
The make-or-buy decision typically would include considerations about a.profit margins as a result of vendor-managed inventory...
Ritz Products's materials manager, Tej Dhakar, must determine whether to make or buy a new semiconductor for the wrist TV that the firm is about to produce. Two million units are expected to be produced over the life cycle. If the product is made, start-up and production costs of the make decision total $1 million, with a probability of 0.4 that the product will be satisfactory and a 0.6 probability that it will not. If the product is not satisfactory,...
Make or Buy Decision: Zee-Drive Ltd. is a computer manufacturer. One of the items they make is monitors. Zee-Drive has the opportunity to purchase 20,000 monitors from an outside supplier for $197 per unit. One of the company's cost-accounting interns prepared the following schedule of Zee-Drive's cost to produce 20,000 monitors: Total cost of producing 20,000 monitors Unit cost Direct materials $ 2,320,000 $ 116 Direct labor 1,320,000 66 Variable factory overhead 640,000 32 Fixed manufacturing overhead 500,000 25 Fixed...
Make or Buy Decision: Zee-Drive Ltd. is a computer manufacturer. One of the items they make is monitors. Zee-Drive has the opportunity to purchase 16,000 monitors from an outside supplier for $204 per unit. One of the company's cost-accounting interns prepared the following schedule of Zee-Drive's cost to produce 16,000 monitors: Total cost of producing 16,000 monitors Unit cost Direct materials $ 1,792,000 $ 112 Direct labor 1,152,000 72 Variable factory overhead 512,000 32 Fixed manufacturing overhead 448,000 28 Fixed...
Factors that may influence a firm's decision to buy goods rather than produce goods internally include a lack of in-house expertise, small volume requirements, a desire for multiple sourcing, and the fact that the item may not be critical to the firm's strategy. Additional consideration may be given if the firm has the opportunity to work with a company that has provided outsourced services successfully in the past and can sustain a long-term relationship (Kenton, 2019). Additionally, most businesses make...
Ritz Products's materials manager, Tej Dhakar, must determine whether to make or buy a new semiconductor for the wrist TV that the firm is about to produce.One million units are expected to be produced over the life cycle. If the product is made, start-up and production costs of the make decision total $11 million, with a probability of 0.40 that the product will be satisfactory and a 0.60 probability that it will not. If the product is not satisfactory, the...
Outsourcing (Make-or-Buy) Decision Mountain Air Limited manufactures a line of room air purifiers. Management is currently evaluating the possible production of an air purifier for automobiles. Based on an annual volume of 10,000 units, the predicted cost per unit of an auto air purifier follows. Direct materials $ 9.00 Direct labor 1.40 Factory overhead 10.00 Total $ 20.40 These cost predictions include $80,000 in fixed factory overhead averaged over 10,000 units. The completed air purifier units include a battery-operated electric...
Problem 11-28 Make or Buy Decisions [LO11-3] “In my opinion, we ought to stop making our own drums and accept that outside supplier’s offer,” said Wim Niewindt, managing director of Antilles Refining, N.V., of Aruba. “At a price of $22 per drum, we would be paying $3.50 less than it costs us to manufacture the drums in our own plant. Since we use 95,000 drums a year, that would be an annual cost savings of $332,500.” Antilles Refining’s current cost...
Problem 11-28 Make or Buy Decisions [LO11-3] "In my opinion, we ought to stop making our own drums and accept that outside supplier's offer." said Wim Niewindt, managing director of Antilles Refining. N.V.. of Aruba. "At a price of $20 per drum, we would be paying $5.25 less than it costs us to manufacture the drums in our own plant. Since we use 95.000 drums a year, that would be an annual cost savings of $498,750." Antilles Refining's current cost...
Problem 11-28 Make or Buy Decisions [LO11-3] “In my opinion, we ought to stop making our own drums and accept that outside supplier’s offer,” said Wim Niewindt, managing director of Antilles Refining, N.V., of Aruba. “At a price of $19 per drum, we would be paying $5.35 less than it costs us to manufacture the drums in our own plant. Since we use 60,000 drums a year, that would be an annual cost savings of $321,000.” Antilles Refining’s current cost...
PROBLEM 12-24 Make or Buy Analysis LO3] "In my opinion, we ought to stop making our own drums and accept that outside supplier's offer" said Wim Niewindt, managing director of Antilles Refining, N.V., of Aruba. "At a price of 18 florins per drum, we would be paying 5 florins less than it costs us to manufacture the drums in our own plant. (The currency in Aruba is the florin, denoted below by fl.) Because we use 60,000 drums a year,...