A Company That Is Already Diversified May Choose to Broaden

question 67

Multiple Choice

A company that is already diversified may choose to broaden its business base by building positions in new related or unrelated businesses because

• A) it has resources or capabilities that are eminently transferable to other related or complementary businesses.
• B) the company's growth is sluggish and it needs the sales and profit boost that a new business can provide.
• C) management wants to lessen the company's vulnerability to seasonal or recessionary influences.
• D) unfavorable driving forces face the company's core business.
• E) All of these.

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Definitions:

Materials Price Variance

Materials price variance is the difference between the actual cost of materials used in production and the standard cost expected, it can indicate changes in market prices or purchasing efficiency.

Quantity Standard

A specific measure established to gauge the expected or optimal quantity of input required to produce a unit of output.

Price Standard

A pre-determined cost per unit of input or output, used for setting budgets and measuring performance.

Variable Overhead Efficiency Variance

Variable overhead efficiency variance is a metric used to measure the difference between the expected (standard) and actual use of variable overhead resources in production.