Make-Or-Buy Options Often Arise When a Manufacturer Has Excess Productive

question 28

True/False

Make-or-buy options often arise when a manufacturer has excess productive capacity in the form of unused equipment, space, and labor.

---

Definitions:

Time Period Assumption

an accounting principle that divides an enterprise's life into small periods of time for reporting and analysis purposes.

Economic Life

The expected period over which an asset remains useful to the owner or until it can generate economic benefits.

Artificial Time Periods

Divisions of time, not naturally occurring, created for the purpose of financial reporting, budgeting, or project scheduling.

Economic Entity Assumption

An accounting principle that treats a company as a separate entity from its owners or shareholders for financial reporting purposes.