If managers make processing or selling decisions using incremental revenue / incremental cost approach, which of the following statements is true?
A) The resulting budgeted product-line income statement under the sales value at split off method, will show each product to have a positive operating income.
B) The resulting budgeted product-line income statement under the physical measure method, will show each product to have a positive operating income.
C) The resulting budgeted product-line income statement under the constant gross margin NRV method, will show each product to have a positive (or zero) operating income.
D) Estimated net-realizable method the resulting budgeted product-line income statement under the estimated NRV method, will show each product to have a zero operating income.
E) The resulting budgeted product-line income statement under the sales value at split off method, will show each product to have a negative operating income.

Question

Quizplus · Accepted Answer

Using the incremental revenue/incremental cost approach, the constant gross margin NRV method is typically used. This results in each product having a positive (or zero) operating income on the budgeted product-line income statement. The other methods listed may result in some products having negative operating incomes or zero operating incomes.

If Managers Make Processing or Selling Decisions Using Incremental Revenue