Question

In a make-or-buy decision, a.the company would consider all fixed overhead to be irrelevant. b.the company would consider the purchase price of the externally provided good to be relevant. c.the company must choose whether or not to close a business unit. d.the company must choose between accepting or rejecting a special order. e.None of these choices are correct.

Answer 1

Answer:b.the company would consider the purchase price of the externally provided good to be relevant.

Explanation:The make or buy decision analysis is an evaluation of manufacturing something in-house versus buying that product from another seller. In other words, it is when a business weighs the pros and cons of making or doing something within the business using company resources or outsourcing that part of production or business function to an outside party.

The make vs buy decision traditionally relates to parts in a manufacturing process. If an organization finds that they can make one or more of the manufacturing inputs that they use in house, then the organization should evaluate the cost and compare it to the cost of purchasing those inputs elsewhere.