Managers May Decide to Invest

question 89

Multiple Choice

Managers may decide to invest
In products that are not associated with the firm's current lines of business to
Increase the firm's level of diversification and decrease their employment risk.

• A)unsubstantial profits
• B)free cash flows
• C)marginal profits
• D)frozen assets

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Definitions:

Predetermined Overhead Rate

An established rate used to assign overhead costs to products or job orders, calculated in advance based on anticipated costs and activities.

Special Order

An order typically outside the company's normal production that has unique requirements and pricing.

Excess Capacity

A situation where a company can produce more than is needed to meet the demand, often resulting in idle resources or underused assets.

Special Equipment

Specialized tools or machinery designed for specific industrial or commercial activities, often requiring significant investment and expertise to operate.