Which One of the Following Statements About Purchasing Is True

question 65

Multiple Choice

Which one of the following statements about purchasing is true?

• A) The cost of purchases as a percent of sales is often small.
• B) Purchasing provides a major opportunity for price increases.
• C) Purchasing is always more efficient than making an item.
• D) Purchasing has an impact on the quality of the goods and services sold.
• E) Competitive bidding is a major factor in long-term cost reductions.

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Definitions:

Deposit Method

An accounting method used when revenue cannot be recognized because the fundamental earnings process is not considered complete.

Cost Recovery Method

An accounting method where revenues are not recognized until all costs have been recovered.

Real Estate Sales

Transactions involving the transfer of ownership rights in property or land from one party to another, typically facilitated by agents or brokers.

Contra-Asset Account

A contra-asset account is an account used in a ledger to reduce the value of a related account. It has a credit balance and is used to adjust the value of an asset account to its net value.