A Major Disadvantage of the Model Stock Approach Is That

question 87

Multiple Choice

A major disadvantage of the model stock approach is that ________.

• A) an inadequate selection of merchandise may be encouraged
• B) storability may not be considered
• C) space may not be assigned on the basis of sales or profit potential
• D) too little space may be assigned for merchandise space

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Definitions:

Absorption Costing

An accounting tactic where the entirety of manufacturing costs—direct materials, direct labor, and manufacturing overhead, both variable and fixed—are included in calculating a product’s cost.

Unit Product Cost

The total expense incurred to produce and deliver one unit of a product, including both direct and indirect costs.

Variable Costing

An accounting technique that entails including only the variable costs of production, like direct materials, labor directly involved in manufacturing, and variable factory overhead, into the pricing of products.

Unit Product Cost

The total cost (fixed and variable) incurred to produce, store, and sell one unit of a product.