For a Backward Vertical Integration Strategy into the Business of Suppliers

question 42

Multiple Choice

For a backward vertical integration strategy into the business of suppliers to be a viable and profitable,a company must possess

• A)a distinctive competence in production process technology and at least a core competence in manufacturing R&D.
• B)large state-of-the-art production facilities so that it can fully capture all economies of scale in producing parts and components.
• C)considerable expertise in supply chain management,transportation logistics,and inventory control techniques.
• D)the capability to achieve the same scale economies as outside suppliers and also match or beat suppliers' production efficiency with no drop in quality.
• E)all kinds of capacity-matching skills and capabilities.

Understand the potential catalysts for a Third Industrial Revolution including the impact of new technologies and cost changes.

Comprehend the basic principles of cost in economics, including the distinction between fixed and variable costs.

Grasp the concept of economic profit and how it is calculated in relation to accounting costs and total revenue.

Identify and explain the significance of the law of diminishing returns in the context of productivity and cost.

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Definitions:

Goodwill Impairment

An accounting charge that companies record when the value of goodwill on the balance sheet exceeds the tested fair market value.

Reporting Units

Components of a business entity for which discrete financial information is available and is reviewed by the entity's management.

Intangible Assets

Assets that do not have physical substance but provide economic benefits to the owner, such as patents, trademarks, and goodwill.

Income Recognition

The accounting principle that income should be recognized in the accounting period in which it is earned, irrespective of when the cash is received.