When a Company Expands by Entering New Business Areas, It

question 51

Multiple Choice

When a company expands by entering new business areas, it is called growth through __________.

• A) diversification
• B) vertical integration
• C) retrenchment
• D) globalization

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Definitions:

Absorption Costing

A strategy in accounting practice that aggregates all manufacturing expenses, from direct materials and labor to variable and fixed overheads, into the determination of a product's cost.

Break-Even Sales

The amount of revenue required to cover both the variable and fixed costs of a business, indicating no profit and no loss.

Contribution Margin

The amount by which the sale of a product exceeds its variable costs, contributing to covering fixed costs and generating profit.

Commercial Segment

A portion of a market composed of businesses and organizations, as opposed to individual consumers.