If the Ability to Sell and the Amount of Production

question 32

True/False

If the ability to sell and the amount of production facilities devoted to each of two products is equal,it is profitable to increase the sales of that product with the highest contribution margin.

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Definitions:

Internal Rate Of Return

The discount rate at which the net present value of an investment's cash flows equals zero, used in capital budgeting to estimate the profitability of potential investments.

Operating Costs

Expenses associated with the day-to-day operations of a business, excluding costs directly related to production, such as utilities, rent, and office supplies.

Profitability Index

A financial metric that measures the relative profitability of an investment, calculated as the present value of future cash flows divided by the initial investment cost.

Present Value

The current value of a future sum of money or stream of cash flows given a specified rate of return.