Which of the Following Most Clearly Indicates Why the Franchiser

question 103

Multiple Choice

Which of the following most clearly indicates why the franchiser of a product has a strong incentive to monitor the quality of the product among all of the franchised sellers?

• A) The franchiser has a monopoly on the sale of products in his industry.
• B) If quality is not maintained, the franchiser will be limited in his ability to sell other franchises and collect franchise fees.
• C) If quality is not maintained, the government will prohibit future sales of the franchises.
• D) Franchisers do not gain financially by maintaining quality, but they generally maintain quality anyway because they are consumers as well as producers.

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Definitions:

First-In, First-Out Method

An inventory valuation method where the oldest inventory items are recorded as sold first, with the cost of these oldest items used for accounting purposes.

Weighted-Average Method

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

Step-Down Method

An indirect method of cost allocation that allocates costs of service departments to producing departments in a sequential manner.

Service Department Cost Allocation

The process of assigning indirect costs from service departments (like maintenance or HR) to producing departments based on their usage of services.