James and Mary Own a Business

question 25

Multiple Choice

James and Mary own a business.When they pay themselves an advance in salary or a bonus, it is called a(n) ________.

• A)payout
• B)cash out
• C)draw
• D)expected outlay

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Definitions:

Absorption Costing

The reporting of the costs of manufactured products, normally direct materials, direct labor, and factory overhead, as product costs.

Operating Leverage

Operating leverage describes the extent to which a company can increase its profits by increasing sales, highlighting the fixed versus variable costs structure.

Operating Income

A metric that calculates the profits realized from a business's core operations, excluding deductions of interest and taxes.

Break-even Point

The point at which total revenue equals total costs, resulting in no profit or loss for the business.