Final answer:
To properly recognize revenue, it should be done after the earnings process is complete and when no future services are to be provided. Improper early recognition can lead to financial misrepresentation. Revenue maximization relies on understanding the price elasticity of demand to inform pricing strategies.
Step-by-step explanation:
When considering which actions alter the amount of revenue recognized, the correct options are:
- Recognize revenue after the earnings process is complete.
- Recognize revenue when no future services remain to be provided.
Altering revenue recognition improperly, such as recognizing revenue before the customer has unconditionally accepted shipment or before the earnings process is complete, can lead to misstated financial statements and is not in line with generally accepted accounting principles (GAAP). Businesses must adhere to specific criteria that dictate the timing and amount of revenue that can be recognized.
In terms of maximizing revenue, price elasticity of demand is a critical concept. Total revenue is the product of price and the quantity sold. If demand is elastic, lowering the price can increase the quantity sold by a larger percentage, thereby increasing the total revenue. Conversely, if demand is inelastic, raising prices may lead to a smaller reduction in quantities sold, thus also increasing total revenue. Understanding the demand elasticity helps businesses make informed decisions about pricing strategies for maximizing revenue.