The Agreed Cost of an Item to Be Purchased by a Business

question 36

Multiple Choice

The agreed cost of an item to be purchased by a business on credit is $4,000and 7% provincial sales tax (PST) . When this transaction isrecorded, what amount will be credited to accounts payable?

• A)$4,240
• B)$4,200
• C)$4,480
• D)$4,000
• E)None of these answers is correct.

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Definitions:

Fixed Costs

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

Composite Unit

A composite unit is an accounting measurement that combines the attributes of multiple units of a similar product or service into a single representation for easier management or evaluation.

Sales Mix

The proportion of different products or services that make up a company's total sales, affecting overall profitability and performance.

Variable Costs

Costs that vary directly with the level of output or production activity, such as raw materials and direct labor expenses.