A Buyer May Try to Estimate the Life-Cycle Cost of Purchasing

question 108

Multiple Choice

A buyer may try to estimate the life-cycle cost of purchasing a product. Life-cycle cost is defined as the

• A) product's purchase cost plus any salvage value.
• B) product's purchase cost plus discounted cost of maintenance and repair less any salvage value.
• C) product's purchase cost plus discounted cost of maintenance and repair plus any salvage value.
• D) product's purchase cost plus discounted cost of maintenance and repair.
• E) product's purchase cost plus the total cost of maintenance and repair less any salvage value.

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Definitions:

Liquidity Reduction

A decrease in the ease with which assets can be converted into cash without significant loss in value.

Cost of Goods Sold

An accounting term representing the direct expenses related to producing or purchasing the goods sold by a company during a given period.

Amortization

The process of gradually paying off debt over a period of time through scheduled, pre-determined payments.

Gross Margin

The gross margin refers to the difference between the revenue generated from sales and the cost of goods sold, usually expressed as a percentage of revenue.