A Diversification Corporate Strategy Implies That a Firm Will ________

question 46

Multiple Choice

A diversification corporate strategy implies that a firm will ________.

• A) become an industry's low-cost leader
• B) expand by adding new product lines
• C) save money by producing its own raw materials
• D) reduce the company's size to increase market share

Understand the principles behind cost-plus pricing.

Calculate and compare production costs for making vs. buying decisions.

Prioritize product production based on contribution margin per constraint unit (e.g., machine hours).

Recognize the concept of opportunity cost and its importance in managerial decision-making.

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Definitions:

Depreciation

The accounting method of allocating the cost of a tangible asset over its useful life, reflecting wear and tear or obsolescence.

Time Value

A financial principle acknowledging that receiving money now is more advantageous than receiving the same amount in the future due to its earning potential.

Payback Method

A capital budgeting technique that calculates the time required to recoup the initial investment through cash inflows.

Accounting Rate

Often refers to the accounting rate of return (ARR), a financial ratio used to measure the profitability of an investment, calculated by dividing the average annual profit by the initial investment cost.