Appendix: Each Partner in a Simple Profit-Sharing Contract That Splits

question 26

Multiple Choice

Appendix: Each partner in a simple profit-sharing contract that splits the independently verifiable sales revenue minus unobservable cost has an incentive

• A) to reject an automatic renewal of the contract
• B) to understate fixed cost
• C) to overstate avoidable cost
• D) to understate customer loyalty for repeat purchases
• E) to renew the partnership contract

---

Definitions:

Equipment

Tangible property used in operations, such as machinery and hardware, that contribute to the production or service of a business.

Inventory

A company's merchandise, raw materials, and finished and unfinished products which have not yet been sold; considered an asset on the balance sheet.

Book Value

The net asset value of a company calculated as total assets minus intangible assets and liabilities.

Net Income

The residual income a company has after expenses and taxes are deducted from its total income.