Which of the Following Describes a Benefit of a Long-Term

question 27

Multiple Choice

Which of the following describes a benefit of a long-term cooperative relationship over a short-term alliance?

• A) It is a substitute for vertical integration because it creates a relatively stable, long-term partnership that allows both companies to obtain the same kinds of benefits that result from vertical integration.
• B) It can help avoid the problems such as bureaucratic costs that arise from managerial inefficiencies that result when a company owns its own suppliers.
• C) Resulting cost savings are shared by suppliers who make substantial investments in specialized assets to better serve the needs of a particular business, and another company.
• D) The businesses jointly find ways to lower costs or increase product quality so both players gain from the relationship.
• E) All of these are benefits of a long-term cooperative relationship. They both gain from their relationship.

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Definitions:

Net Income

This is the total profit of a company after all expenses, taxes, and costs have been subtracted from total revenue.

Net Income

The total profit of a company after all expenses and taxes have been subtracted from total revenue.

Variable Costing

An accounting method that only considers variable costs (costs that change with production levels) in determining product cost, excluding fixed costs.

Gross Margin

A company's total sales revenue minus its cost of goods sold, divided by the total sales revenue, expressed as a percentage. It indicates the efficiency with which a company uses its materials and labor to produce and sell products profitably.