When Making a Make-Or-Buy Decision for a Part,what Items Are

question 88

Multiple Choice

When making a make-or-buy decision for a part,what items are relevant to the decision?

• A)variable costs of making the part
• B)fixed costs that the company can avoid by not making the part
• C)rental income from idle plant when not making the part
• D)all of the above

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Definitions:

Diluted Earnings

Earnings per share calculated by including the effects of all potential dilutive securities, which could decrease earnings per share by increasing the number of shares outstanding.

Potential Dilutive Effect

The possible impact on a company’s earnings per share if convertible securities were converted into common stock, often considered in financial analysis.

If-Converted Method

A calculation technique used to assess the impact on diluted earnings per share if all convertible securities were converted into common stock.

Convertible Securities

Financial instruments, such as bonds or preferred stocks, that can be converted into a predetermined number of common stock or equity shares.