At the Beginning of 2001, Peach Computers Competed Exclusively in the Computer

question 37

Multiple Choice

At the beginning of 2001, Peach Computers competed exclusively in the computer industry and generated approximately 96% of its revenue from the sales of computers and computer-related software and approximately 4% of its revenues were generated from sales of other peripherals. Further, of these revenues, 60% was from sales in the U.S., 30% was from sales in Europe, 7% was from sales in Asia and 3% was from other areas. In October 2001, Peach entered the personal electronics industry by introducing a new MP3 player known as the PeachPit. In developing and selling the PeachPit, Peach Computers was able to use many of the same R&D facilities, suppliers, production facilities, and distribution and sales outlets as the computers and software Peach Computers traditionally sold. By 2003, the PeachPit MP3 Player, accessories for the unit, and sales of songs on Peach Computers' NectarTunes website accounted for 35% of Peach Computers' revenues.
-If Peach Computers were looking to getting into the business of making telephones, its diversification would be called

• A) related-linked.
• B) related-constrained.
• C) related-corporate.
• D) unrelated.

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Definitions:

High-Low Method

A technique used in managerial accounting to estimate fixed and variable costs associated with production.

Break-Even Point

The financial calculation where total revenues equal total expenses, resulting in no profit or loss.

Variable Costs

Costs that vary in total directly and proportionately with changes in the activity level or volume, such as materials and labor.