In a decision to either sell as is or process a product further, joint costs are considered irrelevant and process further costs are considered relevant.
The decision of whether to sell the product right away or wait to sell it in order to earn more money. Although we think that growing the business's income is great, we also need to make sure that the costs associated with the growth will be met. We must contrast the profit margin between selling now and selling later because additional processes will demand more resources and expenses.
Additionally, we need to make an effort to maximise the return on our investment. Additional processes might need more money spent on equipment. These factors require us to apply the sell or process further technique in order to choose the best course of action.
Typically, this scenario occurs in a joint product where one or more outputs can be generated and produce additional revenue. The joint products are produced at the same cost up until the point where they are divided and further sold or processed. Although the products can be sold at the split point, there are instances when continuing developing them is more profitable.
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Answer:
Wilson Inc. developed a business strategy that uses stock options as a major compensation incentive for its top executives. On January 1, 2021, 20 million options were granted, each giving the executive owning them the right to acquire five $1 par common shares. The exercise price is the market price on the grant date—$10 per share. Options vest on January 1, 2025. They cannot be exercised before that date and will expire on December 31, 2027. The fair value of the 20 million options, estimated by an appropriate option pricing model, is $40 per option. Ignore income tax.
Assume that all compensation expense from the stock options granted by Wilson already has been recorded. Further assume that 200,000 options expire in 2014 without being exercised. The journal entry to record this would include
Answer:
The correct option is D,$402,000.
Explanation:
In determining the cash flow provided by operating activities,we need to adjust the net income for effects of non cash items reported.It is important to note that the reverse of the earlier treatment of the items is what is required now.For instance depreciation and amortization were deducted in income statement,for cash flow purposes we need to add both to net income.
Net income $315,000
add depreciation $90,000
amortization $15,000
loss on sale of equipment $9,000
less gain on sale of building($27000)
Cash flow from operations $402,000
The cash flow from operating activities as adjusted is $402,000.
To maximize profits, a firm should continue to increase production of a good until marginal revenue is equal to marginal cost.
According to the cost-benefit analysis, a company should continue to increase production until marginal revenue is equal to marginal cost. A manager maximizes profit when the value of the last unit of product (marginal revenue) equals the cost of producing the last unit of production (marginal cost)
What Is Marginal Revenue?
Marginal revenue is the increase in revenue that results from the sale of one additional unit of output.
What Is Marginal Cost?
In economics, the marginal cost is the change in total production cost that comes from making or producing one additional unit.
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Answer:
They have increased the importance of production economies of scale.
Explanation:
Flexible production allows the manufacture of different types of products in the same industrial production line. This makes companies lower costs by avoiding tool change, time savings, and industry structure.
This type of economy fits into the description of economies of scale. Economies of scale are those where the increase in production results in a decrease in the average cost of the product. Increasing production - by including more products on the production line - without a proportional increase in the factory's installed capacity leads to a reduction in the average cost of production, ie it is an economy of scale.
