Long-Term Contracts Such as Licensing and Franchising Offer an Advantage

question 71

Multiple Choice

Long-term contracts such as licensing and franchising offer an advantage over short-term contracts because:

• A) They cost less.
• B) The competitive bidding process is extended.
• C) There is more incentive for transaction-specific investments.
• D) Licensing transfers ownership; short-term contracts do not.

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Definitions:

Departmental Income Statement

A financial statement that shows the revenue, expenses, and net income for each department within a company, helping to track the performance of distinct areas of the business.

Cost of Goods Sold

The costs incurred directly from the production of goods a company offers for sale, which include material and labor expenses.

Direct Expenses

Direct expenses are costs that can be directly traced to a specific cost object, such as a product, department, or project.

Departmental Contribution Margin

The difference between sales revenue and variable costs for a specific department, indicating its contribution to the overall profit.