A Company Is Proposing to Expand Its Productive Capacity by a Significant

Multiple Choice

A company is proposing to expand its productive capacity by a significant amount. What is the decision rule that should be applied by the directors in deciding whether or not to accept the expansion proposal? Accept the project if:

A) Its incremental revenue exceeds incremental costs
B) Incremental revenue exceeds incremental fixed costs
C) Incremental fixed costs do not exceed variable costs
D) Incremental fixed costs plus incremental variable costs exceed incremental revenue