Imagine That You Are an Entrepreneur, Making Designer T-Shirts in Your

question 113

Multiple Choice

Imagine that you are an entrepreneur, making designer t-shirts in your garage. Your total cost (in dollars) is given by the equation TC = 300 + 10Q, where Q represents the number of t-shirts you make. As you increase your production of t-shirts, your average fixed cost ________ and your marginal cost ________.

• A)decreases; increases
• B)increases; decreases
• C)decreases; stays the same
• D)stays the same; increases

Apply knowledge of non-interest-bearing notes and how they are discounted.

Analyze the financial benefits of taking advantage of cash discounts by borrowing short-term funds.

Compute the savings or costs involved in taking such short-term loans to pay invoices on time.

Practice real-life financial decision-making skills related to loans and interest rates.

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Definitions:

Inventory System

A method or software used by businesses to track stock levels, orders, sales, and deliveries to efficiently manage their inventory.

Average Cost

A calculation that determines the total cost of goods available for sale divided by the total units available for sale, providing a mean cost per unit.

Cost Flow Assumption

An accounting method used to determine the value of unsold inventory and cost of goods sold, examples include FIFO, LIFO, and average cost.

Perpetual Inventory System

An accounting method where records of inventory are updated on a continuous basis as goods are sold or received.