{"id":37941,"date":"2025-06-26T07:01:56","date_gmt":"2025-06-26T07:01:56","guid":{"rendered":"https:\/\/gaviki.com\/blog\/?p=37941"},"modified":"2025-06-26T07:01:58","modified_gmt":"2025-06-26T07:01:58","slug":"which-one-of-the-following-does-not-affect-a-make-or-buy-decision","status":"publish","type":"post","link":"https:\/\/gaviki.com\/blog\/which-one-of-the-following-does-not-affect-a-make-or-buy-decision\/","title":{"rendered":"Which one of the following does not affect a make-or-buy decision"},"content":{"rendered":"\n<p>Which one of the following does not affect a make-or-buy decision?<\/p>\n\n\n\n<p> options: 1) variable manufacturing costs 2) opportunity costs 3) incremental revenue 4) direct labor costs<\/p>\n\n\n\n<p><strong><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-vivid-cyan-blue-color\">The correct answer and explanation is:<\/mark><\/strong><\/p>\n\n\n\n<p>The correct answer is <strong>3) incremental revenue<\/strong>.<\/p>\n\n\n\n<p>Explanation:<\/p>\n\n\n\n<p>A make-or-buy decision involves choosing whether to produce a good or service internally (make) or to purchase it from an external supplier (buy). The decision is primarily based on comparing relevant costs and benefits associated with both options.<\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li><strong>Variable manufacturing costs<\/strong> are costs that change with the level of production, such as materials and utilities. These costs directly impact the cost of making a product and are relevant in the make-or-buy decision because they affect the total cost if production is done internally.<\/li>\n\n\n\n<li><strong>Opportunity costs<\/strong> represent the benefits lost when choosing one alternative over another. For example, if a company makes a part internally, it might lose the chance to use that production capacity for something else more profitable. Opportunity costs are relevant because they reflect potential foregone gains.<\/li>\n\n\n\n<li><strong>Incremental revenue<\/strong> refers to additional revenue generated from selling more products or services. In a make-or-buy decision, the focus is on costs associated with producing or buying the product, not on the revenue generated by the product itself. Incremental revenue is not a factor because the quantity and sales price of the finished product are assumed constant; the decision is about how to source the input, not about increasing sales.<\/li>\n\n\n\n<li><strong>Direct labor costs<\/strong> are the wages paid to workers directly involved in production. These costs are relevant because if the company decides to make the product, these costs must be considered; if the company buys the product, these labor costs may be avoided.<\/li>\n<\/ol>\n\n\n\n<p>In summary, a make-or-buy decision evaluates relevant costs such as variable manufacturing costs, opportunity costs, and direct labor costs to find the most cost-effective choice. Incremental revenue does not affect this decision because it does not change whether the product is made internally or bought externally; it relates to sales volume or pricing rather than sourcing strategy.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Which one of the following does not affect a make-or-buy decision? options: 1) variable manufacturing costs 2) opportunity costs 3) incremental revenue 4) direct labor costs The correct answer and explanation is: The correct answer is 3) incremental revenue. Explanation: A make-or-buy decision involves choosing whether to produce a good or service internally (make) or [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-37941","post","type-post","status-publish","format-standard","hentry","category-quiz-questions"],"_links":{"self":[{"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/posts\/37941","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/comments?post=37941"}],"version-history":[{"count":1,"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/posts\/37941\/revisions"}],"predecessor-version":[{"id":37944,"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/posts\/37941\/revisions\/37944"}],"wp:attachment":[{"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/media?parent=37941"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/categories?post=37941"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/tags?post=37941"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}