Steve,Harry,and Chris,who Own and Operate a Family Auto Parts Store,are

question 22

Multiple Choice

Steve,Harry,and Chris,who own and operate a family auto parts store,are experiencing tough times during a downturn in the local economy.To help the store survive these conditions,the brothers agree to each take a 25 percent reduction in salary for a one-year period.This decision:

• A)demonstrates a weakness of financial management.
• B)illustrates an important advantage of a family business.
• C)reveals a lack of customer orientation in a family business.
• D)reflects a lessening of entrepreneurial ambition in second-generation businesses.

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Definitions:

Weighted-Average Method

The weighted-average method is an inventory costing method that assigns the average cost of all similar items in inventory to the cost of goods sold and ending inventory, smoothing out price fluctuations.

Processing Department

A division within a manufacturing facility where a particular type of processing or production occurs.

Ending Inventory

The value of goods available for sale at the end of an accounting period, calculated by adjusting the beginning inventory for purchases and sales during the period.

Materials

The raw items or supplies used in the manufacturing of a product or in the operation of a business.