Asked by Jamie Wilson on May 20, 2024
Verified
The decision to accept additional business should be based on a comparison of the incremental costs of the added production with the additional revenues to be received.
Incremental Costs
The additional costs incurred when a business increases its level of activity or output, also known as marginal cost.
Additional Revenues
Income received that is over and above the main or expected sources of revenue for a business or an organization.
- Grasp the principles of incremental cost and revenue, and their applications in managerial decisions.
Verified Answer
MV
Maria VillalobosMay 24, 2024
Final Answer :
True
Explanation :
This statement is true. Businesses should always consider the costs and benefits of accepting additional business before making a decision. Incremental costs include any additional costs associated with producing more products or providing more services, such as hiring more staff or purchasing more supplies. Additional revenues are any income generated from the added business, such as sales or service fees. By comparing the incremental costs with the additional revenues, businesses can determine whether it is profitable to accept the additional business or not.
Learning Objectives
- Grasp the principles of incremental cost and revenue, and their applications in managerial decisions.
Related questions
Minor Electric Has Received a Special One-Time Order for 1,500 ...
An Additional Cost Incurred Only If a Company Pursues a ...
A Company Is Considering a New Project That Will Cost ...
Incremental Costs Are the Additional Costs Incurred If a Company ...
If the Total Unit Cost of Manufacturing Product Y Is ...