Make or buy decisions – NBC Institute

MI – May 2023 – L1 – SB – Q2b – Decision-Making Techniques

This question asks whether BBY Limited should accept or reject a special offer based on marginal cost analysis.

Question

BBY Limited manufactures jugs. They have just received an offer for the supply of the same product at ₦500 per jug. The plan is to manufacture 5,000 units within the next 3 months with the following budget:

Expense	N’000
Direct materials	1,000
Direct labour	700
Variable production overhead	600
Variable selling and distribution overhead	700
Fixed production overhead	1,000
Fixed selling and distribution overhead	500
Fixed admin overhead	300

The special offer customer would pick up the products from the factory.

i. Advise whether the company should accept or reject the offer using the data above. Support your computation and decision with appropriate reasons.

ii. Would you make a different decision if the budget figures were as follows?

Expense	N’000
Direct materials	1,030
Direct labour	925
Variable production overhead	645
Variable selling and distribution overhead	350
Variable admin overhead	430
Fixed production overhead	1,100
Fixed selling and distribution overhead	520
Fixed admin overhead	310

(Show your computations and state reasons for your decision).

Answer

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Tags: Cost Analysis, Make or buy decisions, Special Order
Level: Level 1

Topic: Decision-making techniques
Series: MAY 2023

MI – May 2023 – L1 – SB – Q2a – Decision-Making Techniques

This question asks for the qualitative factors to consider when making a make or buy decision.

Question

State FIVE of the qualitative factors to be considered when making a ‘Make or Buy’ decision.

Answer

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Tags: Cost Management, Make or buy decisions, Qualitative Factors
Level: Level 1

Topic: Decision-making techniques
Series: MAY 2023

MI – May 2015 – L1 – SB – Q3 – Costing Methods

Analyze a make or buy decision for MOP heads production.

Question

Tripple Company Limited manufactures “MOP Heads” for use in its various offices across the country. The Cost Accountant has the following costs per unit produced:

A nearby company, Dusters Nigeria Enterprises, has offered to sell 10,000 units of these MOP Heads to Tripple Company Limited for N135 per unit. If Tripple Company Limited accepts the offer, some of the facilities presently in use to manufacture MOP Heads could be rented out to a third party at an annual rent of N195,000. In addition, N18 per unit of the fixed overhead cost applied to the production of MOP Heads would be totally eliminated. The Cost Accountant has also established that 75% of the overhead is fixed.

You are required to:

a. Advise the Chief Executive Officer of Tripple Company Limited whether the company should accept the offer of Dusters Nigeria Enterprises or not. (15 Marks)

b. State FIVE other qualitative factors that the Chief Executive Officer of Tripple Company Limited should consider in making a decision in (a) above. (5 Marks)

Answer

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Tags: Costing, Fixed Overheads, Make or buy decisions, Qualitative Factors, Relevant Costing
Level: Level 1

Topic: Costing Methods
Series: MAY 2015

MA – May 2020 – L2 – Q4c – Decision making techniques, Relevant cost and revenue

Explain how a management accountant can use make or buy analysis and limiting factor principles to solve management problems.

Question

c) Explain how a management accountant can use make or buy analysis and the limiting factor principles to achieve optimal solutions to an internal management problem. (4 marks)

Answer

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Tags: Cost Management, Decision Making, Limiting factors, Make or buy decisions
Level: Level 2

Topic: Decision making techniques, Relevant Cost and Revenue
Series: MAY 2020

MI – May 2023 – L1 – SB – Q2b – Decision-Making Techniques

This question asks whether BBY Limited should accept or reject a special offer based on marginal cost analysis.

Question

Expense	N’000
Direct materials	1,000
Direct labour	700
Variable production overhead	600
Variable selling and distribution overhead	700
Fixed production overhead	1,000
Fixed selling and distribution overhead	500
Fixed admin overhead	300

The special offer customer would pick up the products from the factory.

i. Advise whether the company should accept or reject the offer using the data above. Support your computation and decision with appropriate reasons.

ii. Would you make a different decision if the budget figures were as follows?

Expense	N’000
Direct materials	1,030
Direct labour	925
Variable production overhead	645
Variable selling and distribution overhead	350
Variable admin overhead	430
Fixed production overhead	1,100
Fixed selling and distribution overhead	520
Fixed admin overhead	310

(Show your computations and state reasons for your decision).

Answer

Find Related Questions by Tags, levels, etc.

Tags: Cost Analysis, Make or buy decisions, Special Order
Level: Level 1

Topic: Decision-making techniques
Series: MAY 2023

MI – May 2023 – L1 – SB – Q2a – Decision-Making Techniques

This question asks for the qualitative factors to consider when making a make or buy decision.

Question

State FIVE of the qualitative factors to be considered when making a ‘Make or Buy’ decision.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Cost Management, Make or buy decisions, Qualitative Factors
Level: Level 1

Topic: Decision-making techniques
Series: MAY 2023

MI – May 2015 – L1 – SB – Q3 – Costing Methods

Analyze a make or buy decision for MOP heads production.

Question

Tripple Company Limited manufactures “MOP Heads” for use in its various offices across the country. The Cost Accountant has the following costs per unit produced:

You are required to:

a. Advise the Chief Executive Officer of Tripple Company Limited whether the company should accept the offer of Dusters Nigeria Enterprises or not. (15 Marks)

b. State FIVE other qualitative factors that the Chief Executive Officer of Tripple Company Limited should consider in making a decision in (a) above. (5 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Costing, Fixed Overheads, Make or buy decisions, Qualitative Factors, Relevant Costing
Level: Level 1

Topic: Costing Methods
Series: MAY 2015

MA – May 2020 – L2 – Q4c – Decision making techniques, Relevant cost and revenue

Explain how a management accountant can use make or buy analysis and limiting factor principles to solve management problems.

Question

c) Explain how a management accountant can use make or buy analysis and the limiting factor principles to achieve optimal solutions to an internal management problem. (4 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Cost Management, Decision Making, Limiting factors, Make or buy decisions
Level: Level 2

Topic: Decision making techniques, Relevant Cost and Revenue
Series: MAY 2020

Question Tag: Make or buy decisions

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MI – May 2023 – L1 – SB – Q2b – Decision-Making Techniques

This question asks whether BBY Limited should accept or reject a special offer based on marginal cost analysis.

MI – May 2023 – L1 – SB – Q2a – Decision-Making Techniques

This question asks for the qualitative factors to consider when making a make or buy decision.

MI – May 2015 – L1 – SB – Q3 – Costing Methods

Analyze a make or buy decision for MOP heads production.

MA – May 2020 – L2 – Q4c – Decision making techniques, Relevant cost and revenue

Explain how a management accountant can use make or buy analysis and limiting factor principles to solve management problems.

MI – May 2023 – L1 – SB – Q2b – Decision-Making Techniques

This question asks whether BBY Limited should accept or reject a special offer based on marginal cost analysis.

MI – May 2023 – L1 – SB – Q2a – Decision-Making Techniques

This question asks for the qualitative factors to consider when making a make or buy decision.

MI – May 2015 – L1 – SB – Q3 – Costing Methods

Analyze a make or buy decision for MOP heads production.

MA – May 2020 – L2 – Q4c – Decision making techniques, Relevant cost and revenue

Explain how a management accountant can use make or buy analysis and limiting factor principles to solve management problems.

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MI – May 2023 – L1 – SB – Q2b – Decision-Making Techniques

This question asks whether BBY Limited should accept or reject a special offer based on marginal cost analysis.

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MI – May 2023 – L1 – SB – Q2a – Decision-Making Techniques

This question asks for the qualitative factors to consider when making a make or buy decision.

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MI – May 2015 – L1 – SB – Q3 – Costing Methods

Analyze a make or buy decision for MOP heads production.

You're reporting an error for "MI – May 2015 – L1 – SB – Q3 – Costing Methods"

MA – May 2020 – L2 – Q4c – Decision making techniques, Relevant cost and revenue

Explain how a management accountant can use make or buy analysis and limiting factor principles to solve management problems.

You're reporting an error for "MA – May 2020 – L2 – Q4c – Decision making techniques, Relevant cost and revenue"

MI – May 2023 – L1 – SB – Q2b – Decision-Making Techniques

This question asks whether BBY Limited should accept or reject a special offer based on marginal cost analysis.

You're reporting an error for "MI – May 2023 – L1 – SB – Q2b – Decision-Making Techniques"

MI – May 2023 – L1 – SB – Q2a – Decision-Making Techniques

This question asks for the qualitative factors to consider when making a make or buy decision.

You're reporting an error for "MI – May 2023 – L1 – SB – Q2a – Decision-Making Techniques"

MI – May 2015 – L1 – SB – Q3 – Costing Methods

Analyze a make or buy decision for MOP heads production.

You're reporting an error for "MI – May 2015 – L1 – SB – Q3 – Costing Methods"

MA – May 2020 – L2 – Q4c – Decision making techniques, Relevant cost and revenue

Explain how a management accountant can use make or buy analysis and limiting factor principles to solve management problems.

You're reporting an error for "MA – May 2020 – L2 – Q4c – Decision making techniques, Relevant cost and revenue"

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