Big City Java Is a Local Coffee Bar

question 58

Multiple Choice

Big City Java is a local coffee bar. Using Excel, the manager of Big City Java estimates the weekly demand function for their grand mocha coffees to be Q^d = 650 - (15.25 × P) . The estimated regression equation suggests which of the following is true?

• A)The Law of Demand does not hold for Big City Java's grand mochas.
• B)If a price of $10 is charged, the predicted weekly demand of grand mocha coffees is 639.75.
• C)If a price of $5 is charged, the predicted weekly demand of grand mocha coffees is 573.75.
• D)The horizontal intercept of the demand equation is 15.25.

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Definitions:

Income Statement Approach

A method to prepare the bad debt expense by estimating uncollectible accounts at the end of each period based on expected losses.

Accounts Receivable

Represents the money owed to a company by its customers for goods or services delivered on credit.

Uncollectible Percentage

The estimated portion of accounts receivable that a company does not expect to collect.

Uncollectible Accounts

Accounts receivable that are considered to be uncollectible and represent losses to the company, often written off as bad debt.