Multiple Choice
Given that Lucia Company has set standard costs per unit for direct materials and direct labor, which of the following best describes how Net Sales is calculated on the income statement?
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4. Merchandising Operations
Net Sales
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Join thousands of students who trust us to help them ace their exams!Watch the first videoMultiple Choice
The difference in revenues between two alternatives is called:
A
Differential revenue
B
Operating income
C
Net sales
D
Gross profit
Verified step by step guidance1
Understand the concept of 'Differential Revenue': It refers to the difference in revenues generated between two alternative courses of action. This is a key concept in decision-making and helps businesses evaluate the financial impact of choosing one option over another.
Review the definitions of the other terms provided: 'Operating income' is the profit earned from a company's core business operations, excluding expenses like taxes and interest. 'Net sales' refers to total sales revenue minus returns, allowances, and discounts. 'Gross profit' is the difference between net sales and the cost of goods sold.
Compare the definitions: Among the options provided, 'Differential Revenue' specifically matches the description of the difference in revenues between two alternatives. The other terms do not align with this definition.
Apply the concept to the question: Since the question asks for the term that represents the difference in revenues between two alternatives, the correct answer is 'Differential Revenue'.
Conclude the reasoning: By understanding the definitions and comparing them, it is clear that 'Differential Revenue' is the term that fits the description provided in the question.
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