The absorption-cost approach is used by most companies for all of the following reasons except that
a) absorption cost provides the most defensible bases for justifying prices to interested parties.
b) basing prices on only variable costs could encourage managers to set too low a price to boost sales.
c) this approach is more consistent with cost-volume-profit analysis.
d) absorption cost information is readily provided by a company's cost accounting system.
Answer: c) this approach is more consistent with cost-volume-profit analysis.
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Which type of incentive is designed to change purchasing habits over the long term?
A) financial B) consumer C) convenience D) value-added
Concentric Corporation has 10 million shares of stock outstanding. Concentric's after-tax profits
are $140 million and the corporation's stock is selling at a price-earnings multiple of 18, for a stock price of $252 per share. Concentric's management issues a 40% stock dividend. What is the effect on an investor who owns 100 shares of Concentric before the dividend if Concentric's price-earnings multiple remains the same after the dividend is paid? A) The investor will own 100 shares worth $35,280. B) The investor will own 100 shares worth $25,200. C) The investor will own 140 shares worth $25,200. D) The investor will own 140 shares worth $35,280.