9. Short-term Decisions

Question 1

Make or Buy

Answer 1

This is an outsourcing decision.

Calculate the cost to buy

Calculate the cost to make (including op cost)

Needs to consider both qualitative and quantitative factors.

Question 2

Special Order Decisions

Answer 2

Need to consider whether taking the order will result in higher profits than just not doing it. Also need to consider opportunity costs as well.

Question 3

Constrained Resources

Answer 3

CM / Constrained Resource

Question 4

Add or Drop

Answer 4

This is to see if they’re incrementally profitable - whether the action would result in positive net income.