A Customer Makes Two Offers to Settle a Disputed Account

question 149

Multiple Choice

A customer makes two offers to settle a disputed account. He will either pay you $500 today or pay you $650 in three years. Which one of the following is correct if your company earns 10.5% on its
Surplus funds?

• A) The company should accept the $650 offer as it pays $150 more.
• B) The company should accept the $650 offer as it is worth more today.
• C) The company should accept the $650 offer as it is worth $12.42 more today.
• D) The company should accept the $500 offer as it is worth $18.24 more today.
• E) The company should accept the $500 offer as it is worth $512.42 today.

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Definitions:

Balance Sheet

A financial statement that reports a company's assets, liabilities, and shareholders' equity at a specific point in time.

Manufacturing Overhead

All indirect costs related to the manufacturing process, such as utilities and salaries for management, that cannot be directly traced to specific products.

Direct Materials

Ingredients that are identifiable as directly contributing to the creation of a product.

Direct Labor

The cost of labor directly involved in the manufacture of products, such as wages paid to workers on the assembly line.