REFERENCE: Ref.07_11 Delta Corporation Owns 90 Percent of Sigma Company,and Sigma Owns

question 71

Multiple Choice

REFERENCE: Ref.07_11
Delta Corporation owns 90 percent of Sigma Company,and Sigma owns 90 percent of Pi,Inc. ,all of which are domestic corporations.Information for the three companies for the year ending December 31,2009 follows:

-What is Sigma's accrual-based income for 2009?

• A)$400,000.
• B)$592,000.
• C)$540,000.
• D)$572,800.
• E)$600,000.

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Definitions:

Variable Cost Concept

The principle stating that costs change in proportion to changes in volume of activity or production.

Cost-Plus Approach

A pricing strategy where the selling price is determined by adding a specific markup to a product's cost price to cover overheads and profit.

Markup

The amount added to the cost of a product or service to arrive at a selling price.

Variable Cost Concept

An accounting principle that refers to costs that change in proportion to the level of activity or volume of production.