At a Minimum, the Price of a Product or Service

question 102

Multiple Choice

At a minimum, the price of a product or service must cover

• A) the owner's expected return on investment.
• B) the cost of bringing it to customers.
• C) all costs of the business plus the profit margin.
• D) production and distribution costs.

Understand the terminology and principles of accounting inventory systems.

Calculate discounts and determine the cost of inventory considering the payment terms.

Record transactions related to purchases, sales, and returns under a perpetual inventory system.

Understand the treatment of freight costs in inventory accounting.

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Definitions:

Variable Component

A portion of a cost or expense that varies directly with changes in production volume, business activity, or other variables.

Least-Squares Regression

A statistical method used to determine a line of best fit by minimizing the sum of the squares of the differences between observed values and those predicted by the model.

Inspection Cost

Expenses associated with the activities necessary to ensure that products or services meet the required standards and specifications.

Contribution Format

A format for the income statement that divides variable costs from fixed costs to emphasize the contribution margin.