Jimbob CoIs Considering Offering Each of the Three Products the Company

question 143

Multiple Choice

Jimbob Co.is considering offering each of the three products the company manufactures at two levels - "Standard" and "Advanced".Currently all products are processed to the "Standard" level and all products manufactured at this level can be sold.Management believes that it will be possible to generate additional sales revenue and profits by further processing some of units of the "Standard" level products to the "Advanced" level.Fixed costs will not change in total.In making the decision whether it should process products further which decision rule should be followed?

• A) If there is a positive contribution margin at the "Advanced" level,then process further.
• B) If the unit costs at the "Advanced" level are greater than the unit costs at the "Standard" level,do not further process.
• C) If the difference in the selling price of units at the "Advanced" level over the selling prices of units at the "Standard" level is greater than the additional unit costs of processing from the "Standard" level to the "Advanced" level,then process further.
• D) If the projected selling prices at the "Advanced" level are at least 20% greater than those at the "Standard" level,then process further.

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Definitions:

Net Capital Outflow

The difference between the purchase of domestic assets by foreigners and the purchase of foreign assets by domestic residents over a specific period, reflecting the flow of capital out of and into a country.

Buy American Campaign

A movement encouraging consumers to purchase goods made in the United States in order to support domestic businesses and labor.

Trade Balance

The difference between a country's exports and imports of goods and services.

U.S. Government

The federal government of the United States, a constitutional republic comprising the executive, legislative, and judicial branches.