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The way a firm departmentalizes shapes which later decisions?
AThe tax rate and the audit fee that the firm pays
BThe assignment of authority and lines of communication
CThe interest rate the firm is charged on borrowings
DThe demand for the products that the firm makes
Answer & Solution
Correct answer: B. The assignment of authority and lines of communication
1. Departmentalization fixes which people sit in which unit.
2. That choice then affects how management assigns authority, distributes resources, and rewards performance.
3. It also sets up the lines of communication inside the firm.
4. Tax rates, interest rates, and market demand are set outside the firm and are not consequences of grouping choices.
_Source: OpenStax Introduction to Business (CC BY 4.0), Ch 7 "Designing Organizational Structures", section 7.1 Traditional Structures_
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