A Business May Prefer to Make a Product That It

question 64

Multiple Choice

A business may prefer to make a product that it could subcontract out at a cheaper price because:

• A) by subcontracting, the business may find that supply is less reliable.
• B) it may be concerned that having gained its business, the subcontractor could increase the price charged.
• C) by subcontracting, the business may lose control over quality.
• D) all of the above

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Definitions:

Gift Tax

A tax on the transfer of assets or money from one person to another without receiving something of equal value in return, in excess of annual and lifetime exemptions.

Section 1231

A tax provision that allows for the preferential tax treatment of gains and losses on the sale or exchange of business property and assets held for more than one year.

Depreciation

An accounting method used to allocate the cost of a tangible or physical asset over its useful life, reflecting wear and tear, deterioration, or obsolescence.

FMV

The Fair Market Value represents the price at which property would be sold in an open market scenario.