​A Shoe Salesman Working on Commission Must Decide Whether to Work

question 3

Multiple Choice

​A shoe salesman working on commission must decide whether to work hard or shirk.Working hard would increase the probability of a sale from 20% to 70% but the effort would cost him $5.If the typical commission on a pair of shoes was $8,would he decide to work hard?

• A)​Yes because it is higher than what it costs him in effort
• B)Yes because it is higher than zero
• C)No,because it costs him more in effort
• D)​None of the above

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Definitions:

Direct Material Costs

Costs of raw materials or parts that directly go into producing products.

Weighted-Average Method

An inventory costing method that assigns the average cost of goods available for sale to both ending inventory and cost of goods sold.

Equivalent Units

A concept used in cost accounting to express the amount of work done on incomplete units in terms of fully completed units.

Finished Goods Inventory

Manufactured products that are complete and ready for sale.