Nomfundo Has Established a Successful Business and Would Like to Expand.She

question 72

Multiple Choice

Nomfundo has established a successful business and would like to expand.She is considering becoming a franchisor.Before taking that step, Nomfundo should:

• A)make sure her business model is reproducible.
• B)have a technical writer create an owner's manual.
• C)partner with a lender to offer franchisee financing.
• D)hire a master licensee to locate prospective franchisees.

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Definitions:

Fixed Manufacturing Overhead

Costs associated with manufacturing that do not vary with the level of production, such as rent, salaries of managers, and depreciation of equipment.

Absorption Costing

A costing method that includes all manufacturing costs - direct materials, direct labor, and both variable and fixed overheads - in the cost of a unit of product.

Variable Costing

A costing method that includes only variable production costs—direct materials, direct labor, and variable manufacturing overhead—in the cost of goods sold and reports fixed overhead as an expense of the period.

Fixed Manufacturing Overhead

Indirect production costs that remain constant regardless of the level of goods or services produced.