If Managers Make Processing or Selling Decisions Using Incremental Revenue/incremental

question 69

Multiple Choice

If managers make processing or selling decisions using incremental revenue/incremental cost approach, which of the following statements is TRUE?

• A)The resulting budgeted product-line income statement under the sales value at splitoff method, will show each product to have a positive operating income.
• B)The resulting budgeted product-line income statement under the physical measure method, will show each product to have a positive operating income.
• C)The resulting budgeted product-line income statement under the constant gross margin NRV method, will show each product to have a positive (or zero)operating income.
• D)Estimated net realizable method the resulting budgeted product-line income statement under the estimated NRV method, will show each product to have a zero operating income.
• E)The resulting budgeted product-line income statement under the sales value at splitoff method, will show each product to have a negative operating income.

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Definitions:

Annuity Due

A financial product that pays out a series of payments at the beginning of each period, such as monthly or annually.

Present Value

The current value of a future sum of money or stream of cash flows given a specified rate of return, commonly used to appraise long-term projects.

Discount Rate

The interest rate used to determine the present value of future cash flows in discounted cash flow analysis. It reflects the opportunity cost of capital.

Present Value

The value at present of future cash receipts or a lump sum, taking into consideration a specified rate of return.