Make-Or-Buy Analysis Involves Comparing the Internal Costs of Providing a Product

question 37

True/False

 Make-or-buy analysis involves comparing the internal costs of providing a product with the cost of outsourcing.

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Definitions:

Overhead Cost

The ongoing expenses incurred in operating a business that are not directly associated with the production of goods or services, including rent, utilities, and salaries of non-production staff.

Processing Activity

Activities involved in transforming inputs into finished goods through operations such as assembling, cooking, or chemical processing.

Activity-Based Costing

An accounting method that identifies the activities a firm performs and then assigns indirect costs to products. It improves accuracy of product costing by linking cost more directly to the activities that drive those costs.

Overhead Cost

Indirect expenses related to the general operation of a business, not directly tied to a specific product or service.