Cassie's Quilts Alters,reconstructs,and Restores Heirloom Quilts

question 52

Multiple Choice

Cassie's Quilts alters,reconstructs,and restores heirloom quilts.Cassie has just spent $800 purchasing,cleaning,and reconstructing an antique quilt which she expects to sell for $1,500 once she is finished.After having spent $800,Cassie discovers that she would need some special period fabric that would cost her $200 in material and time in order to complete the task.Alternatively,she can sell the quilt "as is" now for $900.What should she do?

• A)She should cut her losses and sell the quilt now.
• B)It does not matter what she does; she is going to take a loss on her project.
• C)She should purchase the period fabric,complete the task and then sell the quilt.
• D)She should not do any more work on the quilt because she has already spent too much time on it and has not been paid for that time.

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Definitions:

Salespersons' Commissions

This refers to the payment made to sales staff based on a percentage of the sales they generate, as a form of incentive and reward.

Product Cost

The total expenditure incurred to produce, acquire, and sell products, including direct materials, direct labor, and overhead.

Period Cost

Overheads not directly linked to production, charged as expenses in the timeframe they happen.

Direct Materials

The raw materials directly used in the manufacturing of a product, easily traceable to the finished good.