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Question
If the unit cost to buy something is less than the variable cost to make it, the decision to make or buy is based solely on the fixed costs.
Answer
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Related questions
Q:
A small business owner is contemplating the addition of another product line. Capacity increases and equipment will result in an increase in annual fixed costs of $50,000. Variable costs will be $25 per unit. (A) What unit selling price must the owner obtain to break even on a volume of 2,500 units a year?
(B) Because of market conditions, the owner feels a revenue of $47 is preferred to the value determined in part A. What volume of output will be required to achieve a profit of $16,000 using this revenue?
Q:
Students at a major university must go through several registration steps. Officials have observed that it is typically the case that the waiting line at the fee-payment station is the longest. This would seem to suggest that the fee-payment station is the ___________ in the student registration process.
A. capacity cushion
B. first station
C. bottleneck
D. economy of scale
E. diseconomy of scale
Q:
Suppose operation X feeds directly into operation Y. All of X's output goes to Y, and Y has no other operations feeding into it. X has a design capacity of 80 units per hour and an effective capacity of 72 units per hour. Y has a design capacity of 100 units per hour. What is Y's maximum possible utilization?
A. 80 percent
B. 72 percent
C. 90 percent
D. 70 percent
E. 60 percent
Q:
Which of the following makes using present value approaches in capacity decisions difficult?
A. The discount rate must be adjusted to account for inflation.
B. Some cash flows are positive and other cash flows are negative.
C. The payback period might not be long enough to justify a capacity decision.
D. Capacity decisions are made amidst much uncertainty, so cash flows cannot be estimated with great accuracy.
E. There is a cash outflow at the outset followed by, possibly, net cash inflows.
Q:
Operation X feeds into operation Y. Operation X has an effective capacity of 55 units per hour. Operation Y has an effective capacity of 50 units per hour. Finding a way to increase Y's effective capacity would be an example of ________ a constraint.
A. overcoming
B. cushioning
C. insourcing
D. cycling
E. repositioning
Q:
The owner of a greenhouse and nursery is considering whether to spend $6,000 to acquire the licensing rights to grow a new variety of rosebush, which she could then sell for $6 each. Per-unit variable cost would be $3. How many rosebushes would she have to produce and sell in order to make a profit of $6,000?
A. 1,600
B. 2,400
C. 3,000
D. 1,000
E. 4,000
Q:
The owner of Firewood To Go is considering buying a hydraulic wood splitter which sells for $50,000. He figures it will cost an additional $100 per cord to purchase and split wood with this machine, while he can sell each cord of split wood for $125. If, for this machine, design capacity is 50 cords per day, effective capacity is 40 cords per day, and actual output is expected to be 32 cords per day, what would be its efficiency?
A. 100 percent
B. 80 percent
C. 75 percent
D. 70 percent
E. 0 percent
Q:
The owner of Firewood To Go is considering buying a hydraulic wood splitter which sells for $50,000. He figures it will cost an additional $100 per cord to purchase and split wood with this machine, while he can sell each cord of split wood for $125. What would the potential profit be if he were to split 4,000 cords of wood with this machine?
A. $0
B. $200,000
C. $100,000
D. $75,000
E. $50,000
Q:
The method of financial analysis which focuses on the length of time it takes to recover the initial cost of an investment is:
A. payback.
B. net present value.
C. internal rate of return.
D. queuing.
E. cost-volume.
Q:
If the output rate is increased but the average unit costs also increase, we are experiencing:
A. market share erosion.
B. economies of scale.
C. diseconomies of scale.
D. value-added accounting.
E. step-function scaleup.
Q:
What is the break-even quantity for the following situation? FC = $1,200 per week
VC = $2 per unit
Rev = $6 per unit
A. 100
B. 200
C. 600
D. 1,200
E. 300
Q:
Short-term considerations in determining capacity requirements include:
A. demand trend.
B. cyclical demand variations.
C. seasonal demand variations.
D. mission statements.
E. new product development plans.
Q:
Capacity in excess of expected demand that is intended to offset uncertainty is a:
A. margin protect.
B. line balance.
C. capacity cushion.
D. timing bubble.
E. positioning hedge.
Q:
Which of the following is not a strategy to manage service capacity?
A. hiring extra workers
B. backordering
C. pricing and promotion
D. part-time workers
E. subcontracting
Q:
Given the following information, what would utilization be? Effective capacity = 20 units per day
Design capacity = 60 units per day
Actual output = 15 units per day
A. 1/4
B. 1/3
C. 1/2
D. 3/4
E. none of these
Q:
The ratio of actual output to design capacity is:
A. design capacity.
B. effective capacity.
C. actual capacity.
D. efficiency.
E. utilization.
Q:
Maximum capacity refers to the upper limit of:
A. inventories.
B. demand.
C. supplies.
D. rate of output.
E. finances.
Q:
In cost-volume analysis, costs that vary directly with volume of output are referred to as fixed costs because they are a fixed percentage of output levels.
Q:
Cost and competitive priorities reduce effective capacities.
Q:
An example of an external factor that influences effective capacity is government safety regulations.
Q:
Utilization is defined as the ratio of effective capacity to design capacity.
Q:
Increasing productivity and also quality will result in increased capacity.
Q:
One of these is not a characteristic of a well-designed service system:
A. user friendly
B. robust
C. distributed computer networks
D. cost effective
E. easy to sustain
Q:
The term "standardization" is closely associated with:
A. customization.
B. high cost.
C. longer lead times.
D. variety.
E. interchangeability.
Q:
The term "degrees of newness" is associated with:
A. average age of employees.
B. average length of time on the job.
C. total years of business experience.
D. degree of design change.
E. average age of the capital equipment.
Q:
Which of the following statements about CAD is not true?
A. It increases the productivity of designers.
B. It uses computer graphics.
C. It requires a good database.
D. Some systems permit engineering or cost analysis of proposed designs.
E. It is used successfully by all manufacturing companies.
Q:
The research and development activity which starts after positive research results are available and attempts to turn these results into useful commercial applications is:
A. basic research.
B. applied research.
C. development.
D. redesign.
E. commercial research.
Q:
Which of the following is not a reason for redesigning a product or service?
A. to reduce labor or material cost
B. to increase the level of employee satisfaction
C. to increase the level of customer satisfaction
D. to attract and increase customer demand
E. to increase quality
Q:
Delayed differentiation and modular design are tactics for mass customization.
Q:
Standardization can at times lead to serious difficulties and competitive struggles, particularly when systems are running under different conditions.