Suppose a Firm Has Decided to Break Its Departments Down

question 122

Multiple Choice

Suppose a firm has decided to break its departments down into smaller units. While this likely will help with __________ issues, it raises the possibility that poor decisions will result due to __________.

• A)risk aversion; suboptimization
• B)economies of scale; risk aversion
• C)span of control; suboptimization
• D)span of control; risk aversion
• E)economies of scale; limited span of control

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Definitions:

Manufacturing Overhead

Manufacturing overhead encompasses all the indirect costs associated with producing goods, such as utilities, depreciation, and salaries of support staff, that cannot be directly traced to specific products.

Direct Labor

The compensation given to workers directly engaged in creating goods or services.

Direct Materials

Rephrase: The raw materials or components directly incorporated into a finished product, impacting the product's production process.

Manufacturing Overhead

All indirect costs associated with manufacturing, such as utilities, maintenance, and salaries not directly tied to production.