Question:
A potato chip manufacturer purchases a potato farm. Which of the following regarding its strategy is true?
A. The manufacturer has effectively used vertical integration to increase its bargaining position and reduce transaction costs.
B. The manufacturer has enhanced utilisation by allowing depreciation and other fixed costs to be spread over a larger unit volume.
C. The manufacturer has sacrificed quality by using a lower-cost input.
D. The manufacturer has efficiently capitalised on the experience and learning-curve effects within the company.
E. The manufacturer has effectively reduced its operating costs by outsourcing its activities.
Answer:
A. the Manufacturer has effectively used vertical integration to increase it's bargaining position and reduce transaction costs.
Explanation:
Vertical integration is a business strategy whereby a business acquires ownership or controls its suppliers, distributors, or retail locations to control its value or supply chain.
It may also be said that vertical integration has to do with the purchase of a part of all of the production or sales process that was previously outsourced, to have it done in-house.
An example of companies who have done this are:
1. Apple
2. Netflix
3. Comcast (Which acquired NBC)
Businesses can integrate by
- purchasing their suppliers to reduce the costs of manufacturing or
- controlling the distribution process that is, owning and controlling the warehousing and delivery of their products etc.
Answer:
The value of the bond today is closest to $1648.85
Explanation:
The value of the bond today is closest to:
Present Value = FV / (1+i)^n
*m
FV= 2500
I = 4.25 = 0.0425
N= 5
M= 2
The value of the bond today = 2500 / (1+0.0425) ^5*2
The value of the bond today = 2500 / 1.516214468
The value of the bond today = 1648.853256
The value of the bond today = $1648.85
The goods that are excludable are private goods and club goods. The correct answer to this question is option D.
The club goods are those goods that can be artificially scarce. These goods are non rival in nature but the excludability is quite high.
Private goods on the other hands are those goods that have their usage and consumption restricted to only one person or group.
Such goods can only be used by one party.
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Answer:
- Forecasting
Explanation:
Forecasting is a technique used by businesses to determine how much of a good to produce. Companies rely heavily on past sales volumes to forecast future productions. Apart from past sales, firms also consider trends in the industry and the countries economic status.
Forecasting is also known as projecting as it involves a rational way of predicting future productions.
Answer:
D. $96,000
Explanation:
We will allocate the cost on maintenance by first stablishing a rate per maintenence hour:
As this is direct method we aren''t doing an allocation to other service department we directly allocate against production department A and B
total hours: 480 + 320 = 800
160,000 total cost /800 hours = 200 per hour
Department B hours: 480
allocate to department B: 480 x 200 = 96,000
