A Negative Consequence of Recording Byproducts in the Accounting Records

question 69

Multiple Choice

A negative consequence of recording byproducts in the accounting records when the sale occurs is that:

• A)the revenue from the byproducts is usually fairly large, and the accounting records will be distorted
• B)managers can time earnings by their decision when to sell byproducts
• C)managers have an incentive to stockpile byproducts
• D)Both B and C are correct.

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Definitions:

Price Leadership

A pricing strategy where one leading company sets the price of products or services, and other competitors in the market follow.

General Motors

An American multinational corporation headquartered in Detroit that designs, manufactures, markets, and distributes vehicles and vehicle parts.

Price Leadership

A situation where the leading firm in an industry establishes the price of products or services, and competitors follow.

Product Differentiation

The process used by businesses to distinguish their products from similar offerings by competitors to attract a specific target market.