CPIM Practice Exam

In the manufacturing context, what does the term 'make-or-buy decision' influence?

1. Marketing strategies

2. Financial forecasting

3. Production costs

4. Supplier selection

The correct answer is: Production costs

The make-or-buy decision primarily influences production costs within the manufacturing context. This decision involves evaluating whether it is more cost-effective to produce a component or product in-house (make) or to purchase it from an external supplier (buy). When a business opts to manufacture a specific part, it incurs various costs, including labor, materials, overhead, and potentially additional investments in machinery or technology. On the other hand, buying from a supplier might involve different expenses, such as purchasing costs, shipping, and possible markup from the supplier. By thoroughly analyzing these factors, a company can determine which option will lead to lower production costs and better resource allocation. This decision is crucial not only to manage budgets effectively but also to maintain competitive pricing and profit margins in the market. Thus, the make-or-buy choice directly ties into production costs, influencing overall financial performance and strategic planning in the manufacturing sector.