Making Components Is Preferable to Buying Them from an Outside

question 15

True/False

Making components is preferable to buying them from an outside vendor when using idle plant capacity would boost production efficiency, in-house production would protect a secret design, or the firm can reduce the cost of investment by purchasing equipment that will soon be obsolete.

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Definitions:

Adjusting Entry

Journal entries made in accounting records at the end of an accounting period to allocate income and expenditures to the period in which they actually occurred.

Single-Step Income Statement

A simplified income statement that calculates net income by subtracting expenses from revenues in one step.

Statement of Owner's Equity

A financial statement detailing changes in the equity of a company's owner(s) over time, including contributions, withdrawals, and the impacts of net income or loss.

Administrative Expenses

Overhead expenses not directly attributable to specific business operations, such as salaries of senior executives.