A Senior Manager Argues That the Negative Perception Associated with Mounting

question 75

Multiple Choice

A senior manager argues that the negative perception associated with mounting credit card debt will affect StarMart.Which of the following would be the LEAST effective measure StarMart could take to address this potential problem?

• A) publicizing the company's policies in clear and easy-to-understand language
• B) charging no more than the typical interest rate for month-to-month debt
• C) ensuring that fees for exceeding credit limits are no higher than necessary
• D) increasing the value of the promotional items that attract new credit card customers
• E) offering free debt counseling to Axiom-Star customers

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Definitions:

Net Income

The total earnings of a company after subtracting all expenses, taxes, and losses.

Variable Costing Approach

An accounting method that considers only variable costs as product costs and all fixed costs as period costs, affecting inventory valuation and profitability.

Absorption Cost Approach

A costing method that includes all manufacturing costs — direct materials, direct labor, and both variable and fixed manufacturing overhead — in the cost of a product.

Fixed Costs

Expenses that do not change with the level of production or sales activities, such as rent, salaries, and insurance.