Diversification Is Often a Poor Motive for Mergers Because

question 71

Multiple Choice

Diversification is often a poor motive for mergers because:

• A)Vertical integration is rarely successful
• B)Investors can diversify on their own account
• C)It does not produce economies of scale
• D)The increase in taxes overcomes gains in earnings

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Definitions:

Monthly Fixed Cost

Regular expenses that do not vary with production level or sales volume, incurred on a monthly basis.

Variable Manufacturing Cost Per Unit

The total variable costs involved in manufacturing a product, divided by the number of units produced.

Overhead Cost

Expenses related to the operation of a business that cannot be directly tied to a specific product or service, such as rent and utilities.

Setups

The process or cost of configuring machinery or equipment to change from producing one product to another.