Which of the Following Most Clearly Indicates Why the Franchiser

question 103

Multiple Choice

Which of the following most clearly indicates why the franchiser of a product has a strong incentive to monitor the quality of the product among all of the franchised sellers?

• A) The franchiser has a monopoly on the sale of products in his industry.
• B) If quality is not maintained, the franchiser will be limited in his ability to sell other franchises and collect franchise fees.
• C) If quality is not maintained, the government will prohibit future sales of the franchises.
• D) Franchisers do not gain financially by maintaining quality, but they generally maintain quality anyway because they are consumers as well as producers.

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Definitions:

Labor Efficiency Variance

The difference between the actual labor hours used to produce a good or service and the standard labor hours expected to be used, measuring labor efficiency.

Variable Overhead Rate Variance

The difference between the actual variable overhead incurred and the expected (or standard) variable overhead based on activity levels.

Favorable

A term used in accounting and finance to describe outcomes or variances that are better than anticipated, indicating a positive performance against the budget or forecast.

Unfavorable

A term used to describe a variance or outcome that results in a worse financial position than expected or budgeted.