Multiple Products Make Using Financial Models More Complex

question 47

Multiple Choice

Multiple products make using financial models more complex.To deal with this,managers can do which of the following?

• A)assume that all products have the same contribution margin.
• B)use contribution margin as a measure of volume.
• C)assume a weighted-average sales volume.
• D)All of the answers are correct.

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Definitions:

Cash-Basis Expenses

Expenses recorded when cash is actually paid out, under the cash basis of accounting, as opposed to the accrual basis which recognizes expenses when they are incurred.

Warranty Expenses

Costs recognized by companies to cover repairs or replacements for customers as part of product warranty agreements.

Inventory Purchases

The buying of goods to be sold in the normal course of business operations.

Sustainable Income

Revenue that can be maintained for the foreseeable future without diminishing resources or opportunities.