Under a Distributorship

question 12

Multiple Choice

Under a distributorship:

• A) the distributor, like an agent, does not take title to the merchandise it receives.
• B) the producer bears many of the risks connected with commercial sales.
• C) both the producer and the distributor must take special care to ensure that the arrangement does not violate the antitrust laws of their respective governments.
• D) multinational enterprises wishing to exploit an intellectual property right sell to a foreign company the right to use such property.

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Definitions:

Operating Leverage

The degree to which a firm or project can increase operating income by increasing revenue, a measure of how revenue growth translates into growth in operating income.

Variable Costing

A managerial accounting method that includes only variable production costs (materials, labor, and overhead) in product costs, treating fixed manufacturing overhead as an expense of the period.

Absorption Costing

An accounting method that includes all manufacturing costs - direct materials, direct labor, and both variable and fixed manufacturing overhead - in the cost of a product.

Net Income

The total profit of a company after all expenses and taxes have been deducted from total revenues.