Question

A company that manufactures brakes for cars has just released a line of all-terrain vehicles. Using the same research and findings from the development of the ATV brakes, the manufacturer is redesigning its car brakes. By sharing the research across the business units for both vehicles, the company is increasing company profitability through:

a. restructuring.
b. product bundling.
c. commonalities.
d. economies of scope.

Answer 1

The manufacturer is increasing company profitability through economies of scope by sharing research and findings from the development of ATV brakes to redesign its car brakes.

Step-by-step explanation:

The correct answer is d. economies of scope. By sharing the research and findings from the development of the ATV brakes across the business units for both the ATV and car brakes, the company is able to take advantage of the economies of scope which allows them to increase their profitability. Economies of scope refer to the cost advantages that a company can achieve by producing multiple products or services using the same resources and capabilities.