The Cofounders for Contap Received $275,000 from Venture Capitalists

question 71

Multiple Choice

The cofounders for Contap received $275,000 from venture capitalists.What did the investors receive in return?

• A)5% royalties from future sales
• B)15% equity in the business
• C)50% equity in the business
• D)10% royalties from future sales

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Definitions:

Absorption Costing

An accounting method that includes all manufacturing costs (direct materials, direct labor, and both variable and fixed manufacturing overhead) in the cost of a product.

Net Profit

The amount of money a company earns after deducting all its expenses, taxes, and costs from its total revenue.

Variable Manufacturing Costs

Costs that fluctuate with the level of production, including direct materials, direct labor, and variable manufacturing overhead.

Direct Method

An accounting approach used to allocate service department costs directly to producing departments without considering other service departments.