Jim Left His Previous Job as a Sales Manager and Started

question 148

Multiple Choice

Jim left his previous job as a sales manager and started his own sales consulting business. He previously earned $70,000 per year, but he now pays himself $25,000 per year while he is building the new business. What is the economic cost of the time he contributes to the new business?

• A) $25,000 per year
• B) zero
• C) $70,000 per year
• D) $45,000 per year

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Definitions:

Differential Analysis

The process of comparing the financial differences between alternative business actions in order to make informed decisions.

CVP Analysis

Cost-Volume-Profit Analysis, a financial tool used to estimate how changes in costs, sales volume, and price affect a company's profit.

Incremental Analysis

The process of comparing the additional costs and benefits of a decision to determine if it is worthwhile.

Relevant Information

Data that is applicable to the decision-making process, often involving financial and operational outcomes.