Fact Pattern 41-1A (Questions A3-A5 Apply)

question 23

Multiple Choice

Fact Pattern 41-1A (Questions A3-A5 apply)
Cherry Grove Apartments,Inc.,merges with Dutch Elm Realty,Inc.Only Dutch Elm remains.
-Refer to Fact Pattern 41-2A.New Energy assumes

• A)all of Petro's and Oil's assets.
• B)half of Petro's and Oil's assets.
• C)none of Petro's and Oil's assets.
• D)only debts that Petro and Oil incurred after a combina?tion was proposed.

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Definitions:

Variable Production Costs

Costs that fluctuate directly with the level of output, including materials, labor, and other expenses that vary with production volume.

Fixed Cost

Expenses that remain constant in total regardless of changes in the level of production or sales volume, such as rent, salaries, and insurance.

Contribution Margin Ratio

A financial metric that shows what portion of sales revenue is available to cover fixed costs and generate profit after variable costs have been paid.

Fixed Expenses

Costs that do not fluctuate with changes in production level or sales volume, such as rent, salaries, and insurance premiums.