Brock Morton Has a Fast-Food Franchise and Must Pay a Franchise

question 80

Multiple Choice

Brock Morton has a fast-food franchise and must pay a franchise fee of $45,000 plus 4% of gross sales. In terms of cost behavior, the fee is known as a:

• A) variable cost.
• B) fixed cost.
• C) step-fixed cost.
• D) semivariable cost.
• E) curvilinear cost.

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Definitions:

Social Security Taxes

Taxes collected from employees and employers to fund the Social Security program, which provides benefits to retirees, disabled persons, and survivors of deceased workers.

Unfunded Pension Liability

The shortfall between the present value of the pension obligations to employees and the assets set aside to meet those obligations.

Balance Sheet

A financial statement that summarizes a company's assets, liabilities, and shareholders' equity at a specific point in time, providing a snapshot of its financial condition.

Defined Benefit Plans

Pension plans where the employer promises a specified pension payment upon retirement, based on factors like salary and years of service.