Determining whether it is less expensive to prepare on-site vs purchase ready-made is known as

Determining whether it is less expensive to prepare on-site vs purchase ready-made is known as

• A. A make-or-buy analysis.
• B. Cost-volume analysis.
• C. Make-to-stock method.
• D. Procurement variance.

Answer: (A)

This is a make-or-buy decision, where the focus is on comparing the total cost of making something on-site versus buying it ready-made from a supplier. The analysis weighs direct labor, materials, and overhead for in-house production against the purchase price, shipping, and any related risks or benefits like supplier reliability and lead times. The goal is to determine the cheaper option given the current context, capacities, and strategic considerations. The other terms describe different ideas: cost-volume analysis looks at how costs behave as production or sales volume changes; make-to-stock is a production approach aimed at meeting forecasted demand by keeping inventory; procurement variance measures differences between actual procurement costs and planned costs, not the decision to make versus buy.

This is a make-or-buy decision, where the focus is on comparing the total cost of making something on-site versus buying it ready-made from a supplier. The analysis weighs direct labor, materials, and overhead for in-house production against the purchase price, shipping, and any related risks or benefits like supplier reliability and lead times. The goal is to determine the cheaper option given the current context, capacities, and strategic considerations.

The other terms describe different ideas: cost-volume analysis looks at how costs behave as production or sales volume changes; make-to-stock is a production approach aimed at meeting forecasted demand by keeping inventory; procurement variance measures differences between actual procurement costs and planned costs, not the decision to make versus buy.