The Criminal Records Corporation Is Operating at Its Minimum Efficient

question 43

Multiple Choice

The Criminal Records Corporation is operating at its minimum efficient scale, selling 10, 000 records per month via late-night cable TV advertising.It currently buys pressed records from Hole-in-the-Middle, Inc., which has a minimum efficient scale of 100, 000 records per month.Which of the following should Criminal Records do?

• A)Continue to buy 10, 000 records from Hole-in-the-Middle, which can make the records more cheaply.
• B)Buy 100, 000 records from Hole-in-the-Middle, so that company can reach its minimum efficient scale too.
• C)Buy Hole-in-the-Middle and use its facilities to manufacture the 10, 000 records it needs.
• D)Buy Hole-in-the-Middle and stop operating as Criminal Records because Hole-in-the-Middle is the more efficient business.
• E)Buy Hole-in-the-Middle and stop operating as Criminal Records because Hole-in-the-Middle is the larger business.

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Definitions:

Company Tax Rate

The percentage of a company's taxable income that it must pay to the government as tax, varying across jurisdictions and influenced by specific tax laws and regulations.

Intragroup Sale

Transactions involving the exchange of goods or services between entities within the same group of companies.

Consolidation Worksheet

A tool used in accounting to merge the financial statements of a parent company and its subsidiaries.

Inventories

Resources allocated for trading within normal business practices, including those being prepared for sale or as materials and supplies meant for depletion during production or in service rendering.