Duo, Inc, Carries Two Products and Has the Following Year-End Income

question 103

Multiple Choice

Duo, Inc., carries two products and has the following year-end income statement (000s omitted) : If products AR-10 and ZR-7 are substitutes for each other, a sales mix and sales volume variation for the combined products can be calculated. If this combination is calculated, the net effect on profit of the change in the unit sales mix is: (Round intermediate calculations to five significant digits, and your final answer to the nearest whole dollar amount.)

• A) $480 favorable.
• B) $700 favorable.
• C) $560 favorable.
• D) $940 favorable.
• E) $1,960 favorable.

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Definitions:

Residual Income

Income that remains after all costs and expenses, including a charge for capital, have been deducted.

Return On Investment

A measure used to evaluate the efficiency or profitability of an investment, calculated by dividing the net profit of the investment by its initial cost.

Cost Of Capital

Cost of capital represents the return rate that a company must achieve to maintain its market value, affecting its ability to invest in new projects or assets.

Profit-Based Measure

A financial metric used to evaluate the profitability of a business, project, or investment, such as net profit margin.