The Integration of a Cost Leadership and a Differentiation Strategy

question 95

Multiple Choice

The integration of a cost leadership and a differentiation strategy:

• A) is challenging because it increases the number of value-chain activities and support functions in which the firm must become competent.
• B) forces a firm to adapt more slowly to changes in its environment.
• C) allows the firm to avoid being "stuck in the middle."
• D) requires such a large customer base that it is most practical for firms in the global marketplace.

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Definitions:

Underapplied Overhead

When the actual manufacturing overhead costs are higher than the overhead allocated to products or services.

Actual Overhead Cost

The real expenses occurring from indirect costs, such as utilities, rent, and administrative expenses, necessary for running a business.

Indirect Labor Costs

Wages paid to employees who are not directly involved in production work but who support the production process.

Factory Overhead Account

Represents all the indirect costs associated with running a production facility that are not directly tied to a specific product.