Owen Was Surprised When He Calculated the Percentage Annual Interest

question 41

Multiple Choice

Owen was surprised when he calculated the percentage annual interest rate on his accounts payable.He discovered that failure to take advantage of the discount offered by suppliers

• A)makes small difference since a business does not pay a high interest rate.
• B)makes a large difference since a business pays a high interest rate.
• C)has no effect on cash flow since the interest rates are so low.
• D)will have erratic effects on rates for the use of a supplier's money.

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Definitions:

Variable Cost

Expenses in a business that change in proportion with the volume of production or sales, such as materials and labor costs.

Total Cost

Total Cost is the complete cost of production, including both fixed and variable costs.

Average Fixed Cost

The total fixed costs of production divided by the quantity of output produced, showing how fixed costs per unit change with output levels.

Marginal Cost

The cost of producing one additional unit of a good or service, considering the variable costs involved.