How does the residual income approach overcome this problem?

Q: Why Sales revenue does not include the residual value?

A: The residual value, also known as salvage value, is the estimated value of a fixed asset at the end…

Q: Define the term capitalized cost?

A: A Capitalized Cost is the cost incurred in the purchase and financing of fixed assets. It includes…

Q: Please explain the meaning of differential income.

A: Concept of differential is generally used when there are two or more alternatives to choose upon.…

Q: What is the meaning of economic value added (EVA)? What does it measure? Why is it important?

A: Economic value added ("EVA") measures a company's financial performance based on the excess wealth…

Q: How does an “opportunity cost”,  subtracting from the revenue of an alternate course of action,…

A: Opportunity cost: Opportunity cost is a loss of income from one alternative if another alternative…

Q: Why is NOPAT a better performance measure than net income?

A: NOPAT stands for Net Operating Profit After Tax. It refers to the organization's earnings before tax…

Q: What effect do minor deviations from the EOQ have on totalinventory cost?

A: Minor variations from the EOQ will not in general highly affect the total inventory cost except if…

Q: How can the WACC be both an average cost and a marginal cost?

A: Weighted average cost of capital is the aggregated cost of capital with respect to the weights or…

Q: building. Compute the exclusions from gross income of Arturo:

A: Properties received from father is not taxable because it is a relative  So,Immovable asset received…

Q: Understand and apply the lower-of-cost-or-net realizable value rule.

A:

Q: In general terms, how would a change ininvestment opportunities affect the payoutratio under the…

A: Answer: In the residual dividend policy, the distribution is calculated after the company’s spending…

Q: Find an expression for the marginal revenue function, s

A: Marginal revenue is the additional revenue earned from selling one more unit of output.  It is…

Q: What is the relevant range? How does fixed costs and variable costs behave outside the relevant…

A: Relevant range refers to the level of the activity which represents the maximum and minimum limits…

Q: What is passive income? Explain and give examples.

A: Passive Income  An income from a source which is somewhat diverse than  a contractor or an employer…

Q: What is meant by residual income?

A: Net income: The bottom line of income statement which is the result of excess of earnings from…

Q: What does it mean when residual income is zero?

A: Meaning of Residual Income Residual income is the income left after paying all the expenses and…

Q: What are the pitfalls of franchising?

A: Franchising is a licensing that one party takes from the business owner. It allow that party to…

Q: How should managers consider income tax issues when choosing a transfer-pricing method?

A:

Q: What is the difference between a contribution approach income statement and a traditionalapproach…

A: Contribution Approach Income Statement: Under this approach, contribution amount is the main focus…

Q: With example, explain the difference between induced and indirect economic impact.

A: Answer:- Economic impact definition:- An economic impact study investigates the effects of a certain…

Q: The marginal cost of an asset is equivalent to its EUAC. True or False?

A: Marginal Cost of Asset means the cost required to run the asset for the next period. EUAC =…

Q: Define the term Income Smoothing.

A: Income Smoothing: It is an accounting technique which is used to move revenues and expenses of one…

Q: Why is it essential to determine unit costs or profits?

A: Determining unit cost means to find out total cost incurred on a particular unit It is determined by…

Q: Which of the following is NOT considered in cost-volume-profit analysis?

A: Answer: opportunity costs.

Q: In what sense is the WACC an average cost? A marginal cost?

A: Weighted average cost of capital is the firm's cost of capital which is based on proportion of each…

Q: How sensitive is the NPV to changes in the quantity sold?

A: Net Present Value (NPV) is a capital budgeting technique which uses a discount rate to bring all the…

Q: what is meant by Capitalized cost?

A: Capitalized cost is a cost which is incurred in purchasing the fixed asset or making the fixed asset…

Q: How does a contribution margin income statement differ from a traditional income statement?

A: Income statement: The financial statement which reports revenues and expenses from business…

Q: Residual Income

A: The answer is as fallows

Q: What do you mean by the term "income approach"?

A: The income approach is a real estate valuation technique that is computed by dividing the…

Q: What are the major uses of the gross profit method?

A:

Q: What is the difference between gross method and the net method?

A: Gross margin (gross profit): Gross margin is the amount of revenue earned from goods sold over the…

Q: Explain the benefits of a Residual Income structure within an investment center framework.

A: The benefits of residual income are as under :  1) It takes into account the opportunity cost of…

Q: What are “initial direct costs” and how are they accounted for by lessees and lessors?

A: Initial Direct Costs: Initial direct costs refer to the costs that a lessor incurs directly while a…