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Scenario 13

question 74

Multiple Choice

Scenario 13.2 Use the following to answer the questions.
Star Supplies, Inc. manufactures commercial-grade floor cleaners, such as vacuums and floor polishers. The firm has recently begun manufacturing other janitorial-related product lines, such as paper products and chemical cleaners. Star Supplies distributes its products in two ways. It sells its vacuum, floor polisher, and janitorial supply products to an independent business that takes title to the products and then sells them to various small businesses throughout the region. Also, Star has a list of large businesses that it distributes to directly, on an as-needed basis. These businesses keep very little inventory and purchase janitorial supplies in small quantities. Recently, Star has decided to add two new service product lines - paper shredding and a uniform rental service. Clint Rodriguez, the marketing manager, is conducting a meeting to discuss the ways in which Star can strategically manage these new businesses. Star has the choice of marketing the paper shredding service to their large business clients, by picking up the paper as they drop off the other janitorial supplies, or they can buy a small paper shredding business and market to both large and small business customers. With regard to the uniform rental service, Star can either pick up and deliver the uniforms to the small businesses themselves, or contract that out to a third party.
Refer to Scenario 13.2. Currently, Star is using the ____ approach to distributing its janitorial supplies to its large customers.

Definitions:

Cash Account

An account that tracks the flow of cash transactions, including all receipts and payments of cash.

Standard Cost Variances

Differences between the planned (standard) costs and the actual costs incurred.

Cost of Goods Sold

The cost of goods sold (COGS) is the direct cost attributable to the production of goods sold by a company, including the cost of materials and labor.

Standard Cost System

An accounting system that uses estimated costs for material, labor, and overhead to assess performance and control costs.