In 2016,the Allen Company Had Consulting Revenues of $1,000,000 While

question 21

Multiple Choice

In 2016,the Allen Company had consulting revenues of $1,000,000 while operating costs were $750,000.In 2017,Allen will be introducing a new service that will generate $150,000 in sales revenues and $60,000 in operating costs.Assuming no changes are expected for the other services,the differential operating costs for 2017 will be

• A) $250,000.
• B) $150,000.
• C) $90,000.
• D) $60,000.

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Definitions:

Controlling Interest

Ownership of a portion of a company that is large enough to influence or control its operations and decisions, typically over 50% of the voting rights.

Equity Contribution

Capital provided by owners or shareholders to a firm in exchange for an ownership interest or stock.

Initial Investment

The initial amount of capital used to start a business or investment.

Commercial Substance

A scenario where the future cash flows of an asset or group of assets are expected to change significantly due to a transaction.