Forever Quilting Makes Quilting Kits Priced at $120

question 172

Multiple Choice

Forever Quilting makes quilting kits priced at $120. The costs of the materials that go into each kit total $45. It costs $5 in labor to assemble a kit. The company has monthly expenses of $1,000 for rent and insurance, $200 for heat and electricity, $500 for advertising, and $4,500 for the monthly salary of its owner. Forever Quilting's unit variable cost for its kits is

• A) $5.
• B) $45.
• C) $50.
• D) $120.
• E) $170.

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Definitions:

Bad Debts Expense

An expense reported on the income statement, representing the amount of accounts receivable that is not expected to be collected.

Accounts Receivable Turnover

A measure of how efficiently a company collects cash from credit sales, calculated as sales divided by the average accounts receivable.

Net Sales

The revenue generated from the sale of goods and services, after deducting returns, allowances for damaged goods, and discounts.

Allowance for Doubtful Accounts

A contra asset account that represents an estimate of the receivables that may not be collected, reducing the net value of accounts receivable.