If a Business Knows How Many Units Will Be Sold

question 1

Multiple Choice

If a business knows how many units will be sold and what the fixed costs and the variable costs will be,____ allows the selling price to be set to produce a given rate of return.

• A) Cost-plus pricing
• B) Target-return pricing
• C) Penetration pricing
• D) Reference pricing

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Definitions:

Accruing Interest Expense

The process of recording interest expense that has been incurred but not yet paid in the financial statements.

Stockholders' Equity

The portion of a company's assets that can be claimed by its owners, equal to total assets minus total liabilities.

Current Assets

Assets that are expected to be converted into cash, sold, or used up within one year or within the normal operating cycle of the business, whichever is longer.

Operating Income

Profit generated from a company's core business operations, excluding expenses and incomes from other sources.