Multiple Select QuestionSelect all that applyIn a make or buy decision, management should consider: (Check all that apply.)Multiple select question.Existing salesproduct qualitySunk costsIncremental costsWorkloadEmployee morale
Question
Multiple Select QuestionSelect all that applyIn a make or buy decision, management should consider: (Check all that apply.)Multiple select question.Existing salesproduct qualitySunk costsIncremental costsWorkloadEmployee morale
Solution
In a make or buy decision, management should consider:
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Product Quality: The quality of the product is a crucial factor. If the company can produce a higher quality product than what is available to buy, it may choose to make the product. Conversely, if the quality of the product available to buy is higher, the company may choose to buy.
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Sunk Costs: These are costs that have already been incurred and cannot be recovered. Sunk costs should not influence the decision to make or buy, as they are irrelevant to the decision.
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Incremental Costs: These are the additional costs that will be incurred if the product is made. If these costs are lower than the cost of buying the product, the company may choose to make the product.
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Workload: The company must consider whether it has the capacity to take on the additional workload of making the product. If making the product would overburden the company's resources, it may choose to buy.
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Employee Morale: The decision to make or buy can have an impact on employee morale. For example, if the decision to make the product results in layoffs, this could negatively impact morale.
Existing sales are not typically a factor in a make or buy decision, as this decision is more about the costs and benefits of producing a product versus buying it.
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