To Maximize Net Income in a Situation Involving Scarce Resources

question 73

Multiple Choice

To maximize net income in a situation involving scarce resources, a company should:

• A) Manufacture products that generate overall contribution margin
• B) Manufacture products that generate the greatest overall contribution margin per unit of scarce resource
• C) Manufacture products that sell for the highest price
• D) Manufacture products that have the lowest variable costs

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Definitions:

Business Expense

Monetary outlays or costs that are necessary for a company to operate and conduct its business activities.

Leasing Arrangement

A contractual agreement where a lessor allows a lessee to use an asset in exchange for periodic lease payments.

Encumbered Assets

Assets that are used as security or collateral for a loan or debt, restricting their free use or disposal by the owner.

Secured Borrowing

A type of loan in which the borrower pledges an asset as collateral for the loan, which the lender can claim if the loan defaults.