The Critical Test of Whether Diversification Will Create Shareholder Value

question 45

True/False

The critical test of whether diversification will create shareholder value is whether it will contribute to competitive advantage.

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Definitions:

Materials Quantity Variance

The difference between the actual quantity of materials used in production and the expected (or standard) quantity, measured in financial terms.

Direct Materials

These are the raw materials that are directly incorporated into a finished product.

Standard Cost Card

A document that lists the standard costs associated with producing a single unit of a product, including materials, labor, and overhead.

Fixed Manufacturing Overhead

Expenses related to production that remain constant regardless of output quantity, including lease payments, employee wages, and insurance premiums.