In the Context of the Primary Reasons for Vertical Integration

question 64

Multiple Choice

In the context of the primary reasons for vertical integration in companies, what do capabilities refer to?

• A)Whether a company has the finances to handle and overcome organizational criticism
• B)Whether a company knows when it should establish and exercise strict rules and regulations
• C)Whether a company can economize on scarce inputs in order to reduce transaction costs
• D)Whether a company has the right resources to perform an activity better than other firms

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Definitions:

Work In Process Inventory

Goods that are in the process of being manufactured but are not yet complete.

Fixed Overhead Costs

Regular, unchanged costs incurred by a business, regardless of its level of production or activity, such as rent and salaries.

Control Perspective

An approach focusing on the monitoring and adjusting of processes and strategies to achieve desired outcomes or objectives.

Revenue Variance

The difference between how much the revenue should have been, given the actual level of activity, and the actual revenue for the period. A favorable (unfavorable) revenue variance occurs because the revenue is higher (lower) than expected, given the actual level of activity for the period.