Potential Advantages of Contract Manufacturing Include All of the Following

question 135

Multiple Choice

Potential advantages of contract manufacturing include all of the following EXCEPT ________.

• A) reducing plant investment
• B) starting faster with less risk
• C) providing a later opportunity to form a partnership with the local manufacturer
• D) decreasing tariff costs while meeting the country's local manufacturing regulations
• E) loss of potential profits on manufacturing

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Definitions:

Equivalent Units

A concept in cost accounting used to allocate costs to partially completed goods, converting them into the amount of finished goods units that could have been produced with those costs.

Direct Materials

Materials in their unprocessed state that can be directly linked to the production of a particular item.

Equivalent Unit

A concept in cost accounting that converts the amount of work done on incomplete units of production to an equivalent number of fully completed units.

Conversion Costs

Costs incurred during the manufacturing process to convert raw materials into finished goods, composed of direct labor and manufacturing overhead.