Hap Owns and Operates a Small Business with Only Four

question 347

Multiple Choice

Hap owns and operates a small business with only four full-time employees and less than $500,000 in annual sales. He currently uses a manual accounting system and relies on a part-time bookkeeper to keep his records in order. In evaluating the possible adoption of a computerized accounting system, Hap will probably discover that:

• A) the expense of setting up a computerized accounting system would not be affordable at this time.
• B) he would be better off hiring a full-time accountant.
• C) he could benefit from adopting such a system, but should also consult with an accountant for advice about what's best.
• D) a computerized system would be affordable, but that he would have little need for it unless his company became significantly larger.

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Definitions:

Capacity

The maximum amount or number that something can contain or accommodate.

Variable Costs

Costs that change in proportion to the level of production or sales volume.

Fixed Costs

Costs that do not vary with the level of output or activity, remaining constant over a period.

Break-Even Point

The sales volume at which net income is zero; the intersection of the total cost and total revenue lines on a break-even chart.