Which of the Following Statements Is a Disadvantage of Franchising

question 32

Multiple Choice

Which of the following statements is a disadvantage of franchising?

• A) The retailer bears all the loss.
• B) Heavy taxes are levied on the retailer.
• C) Local laws favor the franchise.
• D) The potential profit is reduced.
• E) This is the most expensive method of entering a new market.

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Definitions:

Variable Overhead Rate Variance

The difference between the actual variable overhead incurred and the expected (or standard) variable overhead based on a standard rate.

Variable Manufacturing Overhead

Costs that vary with the level of production output, such as utilities or raw materials.

Direct Labor-hours

The total time workers spend working directly on manufacturing goods, often used as a basis for allocating manufacturing overhead.

Variable Overhead Rate Variance

The difference between the actual variable overhead incurred and the expected (standard) variable overhead based on the actual production level.