Tillamook Farms invests in a new kind of frozen dessert called polar cream that becomes very
popular. So many new customers come to the store that the sales of existing ice cream products are
increased. The extra sales revenue
A) should be included in the analysis, but not the cost of the ice cream that is sold as that is a
recurring expense.
B) are synergistic effects that should be counted as incremental revenues for the polar cream
project.
C) are cannibalized sales that should be excluded from the analysis.
D) should not be counted as incremental revenue for the polar cream project because the sales
come from existing products.
B
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Consider two companies that operate in the same line of business and have the same degree of operating leverage: the Basic Company and the Grundlegend Company. The Basic Company and the Grundlegend Company have, respectively, no debt and 50 percent debt in their capital structure. Which of the following statements is most accurate? Compared to the Basic Company, the Grundlegend Company has:
a. a lower sensitivity of net income to changes in unit sales. b. the same sensitivity of operating income to changes in unit sales. c. the same sensitivity of net income to changes in operating income.
Most of Canada's top CEOs believe that their number one priority is
A) financial performance and profitability B) attracting new employees C) motivating employees D) engaging employees E) retaining employees