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Make or Buy

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Questions and Answers

Which of the following is a potential consequence of setting artificially low or high transfer prices?

Improved performance evaluation
Legal issues and fines (correct)
Enhanced internal relations
Increased profitability

What is one purpose of using transfer prices?

To improve cost efficiency
To optimize operations
To evaluate performance (correct)
To manage internal resources

Why is it important for companies to establish clear, fair policies for setting transfer prices?

To manage internal resources
To optimize operations
To avoid tax implications
To prevent tensions between divisions (correct)

Which of the following factors is a key consideration in make or buy decisions?

Cost (C) Signup and view all the answers

What is the impact of make or buy decisions on an organization's operational efficiency?

Positive impact (B) Signup and view all the answers

Why might a small tech start-up decide to outsource its customer service function?

To reduce long-term costs (D) Signup and view all the answers

Which factor may make it more efficient for a company to outsource rather than produce in-house?

Limited resources (B) Signup and view all the answers

What is the primary reason why companies prefer to control processes and tasks that align closely with their core competencies?

To focus on their main business (B) Signup and view all the answers

Why might a company choose to keep the production of a patented drug in-house?

To protect intellectual property and maintain confidentiality (A) Signup and view all the answers

What is the role of intra-company trading in large corporations with multiple business units?

To enhance efficiency and quality control (D) Signup and view all the answers