A New Watch Manufacturer Would Like to Determine the Market

question 40

Multiple Choice

A new watch manufacturer would like to determine the market price of a new line of watches. How could the manufacturer most effectively determine the market price?

• A) Place several of the new watches on sale at a watch store and see which sells most quickly.
• B) Arrange to sell the watches in a number of diverse auctions.
• C) Set the price of one watch higher than another and see which sells the most quickly.
• D) Survey potential customers and retailers on what they think the price should be.
• E) Canvass executives from competing companies about what they think the price should be.

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Definitions:

Working Papers

Documents that auditors create to support an audit process, including detailed records and summaries of audit evidence.

Operating Cycle

The average period it takes for a business to convert its inventory into cash flows from sales, reflecting the time taken to sell inventory, collect receivables, and pay bills.

Income Summary

An account used in the closing process that summarizes the results of operations—revenues and expenses—over a specific period before transferring the net amount to retain earnings.

Accounting Cycle

A complete cycle that describes the steps in recording and processing financial transactions of a company from when the transaction occurs to its representation on the financial statements, and until the accounts are closed.