Scenario-Based Jerry Foster Is a Sole Proprietorship Who Owns a Canoe

question 133

Multiple Choice

Scenario-Based
Jerry Foster is a sole proprietorship who owns a canoe renting business.Jerry's
employee, Terry Gibbs, greets customers at the company's office, loads the
customers and their rented canoes onto a van, provides them with safety
instructions and drives them upstream.Once unloaded the canoers are on their
own to float back to the company's office to check in.Although there have been
minor accidents, no one has drowned in the nine years the business has been in
operation.Jerry plans to add kayaks and rubber rafts next year.The scenery is
beautiful and each day people see wild animals come down to the water.
-If Jerry wanted to bring Terry into the business, and he was concerned about the cost of changing his form of organization, what legal form of organization
Would he most likely switch to?

• A)corporation
• B)partnership
• C)joint venture
• D)sole proprietorship

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Definitions:

Average Variable Costs

The total variable costs (costs that change with output level) divided by the quantity of output produced.

Average Costs

The total cost of production divided by the number of goods produced, a measure of cost efficiency.

Shutting-Down

A short-term decision by a firm to cease operations while it still has the option to resume in the future, often due to unfavorable market conditions.

Average Costs

The cost per unit is determined by dividing the total production cost by the number of units manufactured.