Refer to the Graphs

question 194

Multiple Choice

Refer to the graphs. Suppose a firm is currently producing 500 computers per week and charging a price of $1,000. What happens to the firm's inventory of computers if there is a negative demand
Shock and prices are flexible?

• A) The firm's inventories will not change.
• B) The firm's inventories will increase by 200 computers per week.
• C) The firm's inventories will decrease by 150 computers per week.
• D) The firm's inventories will increase by 350 computers per week.

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Definitions:

Gross Method

A method in accounting that logs purchases using the total invoice amount, not considering any cash discounts that are available.

Operating Cycle

The operating cycle is a measure of the time period between the acquisition of inventory by a business and the collection of cash from accounts receivable, indicating the efficiency and effectiveness of its operations.

Wholesaler

A wholesaler is a person or company that sells goods in large quantities at lower prices, typically to retailers for resale to the end consumers.

Gross Margin Ratio

A financial metric calculated by subtracting the cost of goods sold from revenue and dividing that figure by revenue, representing the percentage of sales revenue retained after incurring direct production expenses.