A manufacturer uses standard costing, and a potential supplier uses activity-based costing. This difference most likely will have implications for which of the following types of future decisions?
A manufacturer uses standard costing, and a potential supplier uses activity-based costing. This difference most likely will have implications for which of the following types of future decisions?
A manufacturer using standard costing and a potential supplier using activity-based costing most likely will have implications for make-or-buy decisions. This is because make-or-buy decisions require accurate cost comparisons between manufacturing an item internally versus purchasing it from an external supplier. Differences in costing methods can significantly impact the assessment of these costs, making it essential to reconcile these differences for an informed decision.
I will go A, since it will be more difficult to negotiate a price concession, if measured in activity based vs cost based.
Answer is B, since you can't make an informed make/buy decision if both parties are measuring cost differently.
Go for A since make/buy depends on TCO. Moreover, we should be concerned on the price by the supplier not their costing
B, because if the supplier is constantly changing their prices and the manufacturer stays consistent it will eventually need to consider if its more cost effective to produce in house rather than deal with fluctuations.