Question

1. What makes a cost "relevant" to a particular decision?

2. What criteria should a company use when it is deciding whether to continue to make a product internally or to buy it externally?

3. How should an organization decide whether to accept a Special Order?

4. What is the best calculation to determine the most beneficial use of a Constrained Resource?

Answer 1

Answer:

1.

The accompanying focuses make a cost 'relevant' to a specific or particular decision :

• It ought to be identified with that specific decision as it were .
• The expense ought to be gradual increase.The expense should increase on accepting the specific decision.
• The expense or cost ought to be avoidable . It implies in the event that the specific decision isn't picked, at that point that cost,must not acquire.
• It must not be a past or sunk expense.

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2.

Makr or buy choice is regular decision happens much of the time in manufacturing organizations. The organization can decide to purchase an item from outside market as opposed to making it in-house as a result of two reasons. First, the production limit in the in-house isn't adequate or also, it is less expensive to purchase rather making.

In concluding whether to make or buy, the organization must look at its variable expense, with the purchasing cost in outside market. The purpose being the fixed expense of the organization would not increase despite the fact that it produced in-house yet just its variable expense per unit.

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3.

The organization when deciding whether to accept a special order, management must think about a few factors are following:

• The capacity of the organization required to satisfy the special order.
• Regardless of whether the price offered by the purchaser will take care of the expense of producing the items.
• The role of fixed expenses in the analysis.
• Manage the Qualitative issues that create a special order .
• Regardless of whether the order will violate the federal law of robbinson-patman act 1936 and other fair pricing enactment.

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4.

When there is resources are requirement or constraint to make items in-house, the most elevated profit per unit estimation would be perfect. For instance, in the event that material is constraint factor in production, at that point the item that generates most noteworthy "Contribution per unit of material" is perfect to utilize.

In any case, if there are numerous constraints, linear programming can be best procedure to be utilized