Managers Should Choose a Joint Cost Allocation Method To

question 22

Multiple Choice

Managers should choose a joint cost allocation method to:

• A) Justify dropping an unprofitable product
• B) Minimize the total joint cost allocated to all products
• C) Maximize the organization's overall profitability
• D) Avoid giving the mistaken impression that one or more products are sold at a loss

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Definitions:

Internal Rate of Return

The discount rate at which the net present value of all the cash flows (both positive and negative) from a project or investment equals zero.

Salvage Value

The projected value an asset will hold for resale when it's no longer useful.

Tax Rate

The share of one's or a company's revenue earmarked for taxation.

Erosion Costs

Erosion Costs are the costs incurred due to the negative impact of introducing a new product or project on the sales and revenue of existing products or projects.