How is differential analysis used to determine when to add or drop parts of an operation?
A)If the differential costs required to provide the product for sale exceeds the differential revenue from the sale of a product,then the product generates profits and the firm should continue its production.
B)If the differential costs required to provide the product for sale exceeds the differential revenue from the sale of a product,then the product generates losses and the firm should continue its production.
C)If the differential revenue from the sale of a product exceeds the differential costs required to provide the product for sale,then the product generates profits and the firm should continue its production.
D)If the differential revenue from the sale of a product exceeds the differential costs required to provide the product for sale,then the product generates profits and the firm should discontinue its production.

Question

Quizplus · Accepted Answer

Differential analysis is used to determine whether the revenue generated from selling a product exceeds the incremental cost required to produce it. If the differential revenue generated from selling a product exceeds the differential cost required to provide it, then the product generates profit and the firm should continue producing it. Therefore, option C is the correct answer.

How Is Differential Analysis Used to Determine When to Add