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ACCA Applied Skills · Performance Management · Make-or-buy and other short-term decisions

Which factor is a qualitative consideration in a make-or-buy decision that could favour making in-house even if buying is cheaper?

Control over quality and reliability of supply is the qualitative factor. Even when an external price is lower, a firm may prefer to make in-house to protect quality, delivery and confidentiality. Depreciation and absorbed overheads are financial figures and are not relevant here.

  1. AThe depreciation charged on existing machinery
  2. BThe apportioned head office costs
  3. CThe need to maintain control over quality and supply reliabilityCorrect
  4. DThe absorbed fixed overhead rate per unit

Explanation

Quality control and reliability of supply are non-financial factors. The other options are financial items that are either sunk or unavoidable, so not relevant.

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