What Is a Difference Between Merchandising Companies and Service Enterprises

question 223

Multiple Choice

What is a difference between merchandising companies and service enterprises?

• A) Merchandising companies must prepare multiple-step income statements and service enterprises must prepare single-step income statements.
• B) Merchandising companies generally have a longer operating cycle than service enterprises.
• C) Cost of goods sold is an expense for service enterprises but not for merchandising companies.
• D) All are differences.

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Definitions:

Marginal Cost

The financial cost of producing an extra unit of a good or service.

Average Total Cost

The total cost of production divided by the quantity of output produced.

Average Variable Cost

Represents the cost that varies with the level of output, calculated by dividing the variable costs by the quantity produced.

Marginal Cost Curve

A graphical representation showing how the cost of producing one additional unit changes as production volume increases.