Why Is It Advantageous to Make an Extreme Opening Offer

question 43

Essay

Why is it advantageous to make an extreme opening offer?

Understand the accounting treatment for the disposal, sale, exchange, and discarding of fixed assets.

Recognize how different transactions affect the recording of gains or losses on assets.

Understand the process for recording the disposal of fixed assets including the role of accumulated depreciation.

Distinguish between the accounting treatment of tangible and intangible assets, including amortization and research and development costs.

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Definitions:

Break-Even Point

The production level or sales volume at which total revenues equal total expenses, resulting in no net loss or gain.

Contribution Margin Ratio

A financial metric that represents the percentage of sale price that remains after variable costs are subtracted.

Sales Dollars

The total amount of money generated from the sale of goods or services before any expenses are subtracted.

Margin of Safety

The difference between actual or expected sales and the sales volume at which a company breaks even.