Question : Objective 11.3 1) Relevant costs in a make-or-buy decision of a : 1211761

 

Objective 11.3

 

1) Relevant costs in a make-or-buy decision of a part include ________.

A) setup overhead for the manufacture of the product using the outsourced part

B) currently used manufacturing capacity that has alternative uses

C) annual plant insurance costs that will remain the same

D) management consultant fees to restructure the organization framework of the company

 

2) Which of the following is an example of outsourcing?

A) a smartphone manufacturing company factoring its receivables as a source of capital

B) a large conglomerate company selling a business wing to its competitor

C) an automobile company merging with a manufacturing firm to create economic synergies

D) a petrochemical company assigning a vendor to make software for its supply chain management

3) Which of the following is an example of insourcing?

A) a pharmaceutical company’s research team developing a new patent using current resources

B) a smartphone manufacturing company factoring its receivables as a source of capital

C) a large conglomerate company selling a business wing to its competitor

D) a petrochemical company assigning a vendor to make software for its supply chain management

 

4) Which of the following is a relevant cost to be included in a make-or-buy decision?

A) fixed salaries that will not be incurred if the part is outsourced

B) pension costs to the current employees

C) increase in the price of all equipment of the firm

D) material-handling costs that cannot be eliminated

 

5) Which of following is a firm’s risk of outsourcing the production of a part?

A) fluctuation in the manufacturing costs

B) leakage of intellectual property

C) increased need of skilled workers

D) scarcity of indirect labor

 

6) Which of the following minimizes the risks of outsourcing?

A) the use of short-term contracts that specify price

B) shifting the firm’s responsibility for on-time delivery to the supplier

C) building close partnerships with the supplier

D) increasing the contract price

 

7) The cost to produce Part A was $20 per unit in 2013 and in 2014 it has increased to $22 per unit. In 2014, Supplier ABC has offered to supply Part A for $18 per unit. For the make-or-buy decision ________.

A) incremental revenues are $4 per unit

B) incremental costs are $2 per unit

C) net relevant costs are $2 per unit

D) differential costs are $4 per unit

8) When evaluating a make-or-buy decision, which of the following needs to be considered?

A) alternative uses of the production capacity

B) the original cost of the production equipment

C) pension costs to the current employees

D) material-handling costs that cannot be eliminated

 

9) For make-or-buy decisions, a supplier’s ability to maintain secrecy of intellectual property is considered a(n)  ________.

A) qualitative factor

B) irrelevant cost

C) differential factor

D) opportunity cost

 

10) Schmidt Sewing Company incorporates the services of Deb’s Sewing. Schmidt purchases pre-cut dresses from Deb’s. This is primarily known as ________.

A) insourcing

B) outsourcing

C) fragmentation

D) in-housing

 

 

 

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