The Classic Justification of Vertical Integration Relies on the Conviction

question 74

Multiple Choice

The classic justification of vertical integration relies on the conviction that:

• A)The co-location of plants enables each owner to avoid being bound to the other partner for its strategic decisions
• B)The physical integration of two processes, for example linking the two stages of production in a single location, results in cost savings
• C)The physical location of two processes on the same site does not explain why there is not just one owner
• D)Each process owner realizes savings by exploiting its assets in an alliance framework

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Definitions:

Accounts Payable

A liability account that records amounts owed by a company to suppliers or creditors for purchases made on credit.

Merchandise Inventory

Represents the goods a company intends to sell to customers that are purchased and stored, evaluated as a current asset on the balance sheet.

F.O.B. Shipping Point

A term used in shipping contracts indicating that the buyer takes ownership and responsibility for goods once they leave the seller's premises.

F.O.B. Destination

A shipping term indicating that the seller retains risk and ownership of goods until they are delivered to the buyer's location.