What is a typical cost of setting the e-waste factory as a separate unit?

• A. Lower Administrative Burden
• B. Improved Cross-Unit Synergy
• C. Increased Administrative Costs and Potential Loss of Coordination with the Parent Firm
• D. Higher Capital Requirements with No Tax Relief

Answer: (C)

When you set the e-waste factory up as a separate unit, you create a distinct entity that needs its own support functions, reporting, and governance. This duplications of HR, finance, IT, procurement, and compliance drives higher administrative costs. At the same time, having a separate unit can reduce the ease of coordinating with the parent firm, since objectives, budgeting, and performance measures may diverge and decision-making becomes more fragmented. So the typical cost is increased administrative costs and potential loss of coordination with the parent firm.

Lower administrative burden would happen if the unit were integrated with the parent. Improved cross-unit synergy is more likely when units are closely coordinated, not separated. While higher capital requirements with no tax relief can occur in some cases, it’s not the general consequence highlighted by separating an operation; the standard expectation is administrative overhead and coordination challenges.