When a Multinational Corporation Controls the Raw Material Used in the Production

question 9

Multiple Choice

When a multinational corporation controls the raw material used in the production of its final good through a vertical integration,which of the following is most likely to happen?

• A)The MNC will obtain an uninterrupted supply of the raw material at the lowest possible cost.
• B)Consumers will pay lower prices for the good.
• C)The MNC will face anti-trust charges for owning firms that produce both the raw material and the final good.
• D)Consumers will pay higher prices for the good.

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Definitions:

Sales Volume

The total quantity of products or services sold by a company during a specific period of time.

Contribution Margin Ratio

The percentage of each sales dollar that contributes to covering fixed costs and generating profit.

Products

Goods or services that are created through a business process and offered in the market to satisfy the needs or wants of customers.

Predetermined Overhead Rate

This is a rate calculated before the accounting period begins, used to allocate manufacturing overhead costs to products.