Which of the Following Statements Is an Advantage of Related

question 31

Multiple Choice

 Which of the following statements is an advantage of related diversification strategy?

• A) Related diversification strategy allows a firm to maintain several businesses that are not connected in any way.
• B) The sharing of resources is a key component of developing economies of scope and often increases a firm's competitive advantage.
• C) Related diversification strategies often achieve financial economies through the restructuring of business units.
• D) Related diversification strategy can allow a sick or dying company to use capital generated in a profitable division to prop it up for a short period of time.

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Definitions:

Reciprocal Method

An accounting technique used for allocating service department costs to operating departments by incorporating the mutual services provided among all service departments.

Support Departments

Units within an organization that provide essential services or assistance to other units rather than producing goods or services directly.

Cost Equations

Mathematical formulas used to calculate the total cost of producing goods or services, often incorporating variable and fixed costs.

Absorption Costing

A method of accounting that encompasses all costs associated with manufacturing (such as direct materials, direct labor, as well as both variable and fixed overhead expenses) in the pricing of a product.