Based on the Available Forecasts,a Business' Sales Are Expected to Drop

question 31

Multiple Choice

Based on the available forecasts,a business' sales are expected to drop 20 percent in the current year as compared to the previous year.Which of the following will be a cascading effect of this forecast?

• A) The company will have to raise prices to maintain profit margins.
• B) Hiring will be lower during the year.
• C) Competition is likely to reduce during the year.
• D) The company will stock more inventory compared to the previous year.

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Definitions:

Fixed Manufacturing Overhead

Indirect manufacturing costs that remain constant regardless of the level of production, such as factory rent and salaries of supervisory staff.

Direct Labor Cost

A rephrased definition: The cost incurred from the labor of workers who actively contribute to the manufacturing or creation of a product.

Split-off Point

The moment during a production process where multiple products become separately identifiable.

Joint Production Costs

The costs incurred in a production process that yields multiple products simultaneously up to the point of separation.