In Which of the Following Cases Would Consolidation Be Inappropriate

question 14

Multiple Choice

In which of the following cases would consolidation be inappropriate?

• A)The subsidiary is in bankruptcy.
• B)Subsidiary's operations are dissimilar from those of the parent.
• C)The parent owns 90 percent of the subsidiary's common stock,but all of the subsidiary's nonvoting preferred stock is held by a single investor.
• D)Subsidiary is foreign.

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Definitions:

Fixed Manufacturing Overhead

Costs associated with the production process that do not change with the level of output, such as rent, salaries, and utility expenses.

Production Volume

The total number of units of a product or service produced over a specific period.

Sales Volume

The total number of units of product sold during a specific period.

Variable Costing

A costing method that includes only variable costs—direct materials, direct labor, and variable manufacturing overhead—in the cost of a product.