What Is the Risk of a Functional Structure

question 7

Multiple Choice

What is the risk of a functional structure?

• A) The firm cannot avoid duplicating activities.
• B) Employees begin to focus more on their functional areas.
• C) The extra layer of management causes some divisions to work at cross purposes.
• D) The firm does not achieve economies of scale in activities such as marketing.

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Definitions:

Contribution Margin Ratio

A financial metric that shows the percentage of revenue that exceeds variable costs, indicating how much revenue contributes to fixed costs and profits.

Margin of Safety

The difference between actual or expected sales and sales at the break-even point, indicating the cushion against losses.

Sales

The total amount of revenue generated from the selling of goods or services by a company during a specific period.

Cost-Volume-Profit Analysis

Cost-Volume-Profit Analysis is a managerial accounting technique that analyzes how changes in costs and volume affect a company's operating income and net income.