If By-Product Revenue Is Treated as Other Revenue Instead of Deducted

question 139

Multiple Choice

If by-product revenue is treated as other revenue instead of deducted from the net-realizable-value of the main products:

• A) Overall gross margin of the company will be higher.
• B) Overall gross margin of the company will be lower.
• C) The answer would depend on how joint product costs were allocated.
• D) There is no difference in the overall gross margin of the company.

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Definitions:

Competitor's Cost

The expenses incurred by industry rivals, which can influence competitive pricing strategies.

Required Return

The smallest annual percent yield necessary to convince people or corporations to allocate funds towards a certain security or project.

WACC

Weighted Average Cost of Capital, a calculation of a firm's cost of capital in which each category of capital is proportionately weighted, used to determine the rate of return a company must earn on its existing assets to satisfy its creditors, owners, and other providers of capital.

Low Risk Projects

Investments or projects that are considered to have a lower probability of resulting in a financial loss.