Which of the Following Statements About Buying a Franchise Is

question 255

Multiple Choice

Which of the following statements about buying a franchise is most accurate?

• A) One of the advantages of buying a franchise is that franchisors are so closely regulated that there is virtually no chance for scams to succeed.
• B) Before purchasing a franchise, the buyer should carefully evaluate the franchise, the franchisor, his or her own situation, and the nature of the market.
• C) Franchise agreements are simple to evaluate, since federal law requires that all such agreements must be written in plain English with all fees and terms clearly explained.
• D) Buying a franchise is the simplest and least expensive way to set up a business, since the franchisor has already worked out all of the details for setting up and running the business.

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Definitions:

Activity-Based Costing

A costing methodology that assigns overhead and indirect costs to specific activities, providing more accurate product costing.

Estimated Overhead Cost

The projected costs of indirect materials, labor, and other expenses that are necessary for production but cannot be directly associated with specific product units.

Direct Labour-Hours

A measure of the amount of time workers spend directly manufacturing a product or providing a service.

Traditional Costing System

A traditional costing system allocates factory overhead to products based on volume-related measures such as direct labor hours or machine hours.