Terrell Is Trying to Decide Whether to Concentrate His Purchases

question 55

Multiple Choice

Terrell is trying to decide whether to concentrate his purchases with one supplier or diversify with two or three. One factor in favor of a single supplier is

• A) insurance against interruptions caused by strikes.
• B) a particular supplier's superiority in product quality.
• C) knowing the customer's loyalty, the supplier may provide better prices and service.
• D) locating the best source in terms of price, quality, and service with each purchase.

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Definitions:

Single Level

Referring to a structure or system that operates or is organized at one layer or stage without any subdivisions or hierarchical levels.

Activity Levels

Activity Levels in cost accounting refer to the volume of production or operations that can significantly influence costs, guiding how businesses adjust their spending and operational strategies.

Static Budget Report

A financial report based on the assumption of a fixed level of activity and expenditure, without adjusting for variations in actual performance.

Master Budget Activity Level

The projected volume of activity, such as sales or production, that is anticipated and used as a basis for the master budget.