What Would Be a Consideration in a Make-Or-Buy Decision

question 37

Multiple Choice

What would be a consideration in a make-or-buy decision?

• A)excess capacity
• B)variable factory overhead costs
• C)rental income from idle facilities when not making a part
• D)all of the above

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Definitions:

Present Value

The current worth of a future sum of money or stream of cash flows given a specified rate of return, used in discounting and investment appraisal.

Fair Value

Fair value refers to the estimated market value of an asset or liability, based on current market conditions and comparable transactions, used in financial reporting.

Capital Lease

A lease considered to have the economic characteristics of asset ownership for accounting purposes.

Operating Lease

A contract that allows for the use of an asset but does not convey rights of ownership of the asset.