In an Effort to Increase Sales,Sharpy Razor Blade Company Inaugurated

question 25

Multiple Choice

In an effort to increase sales,Sharpy Razor Blade Company inaugurated a sales promotion campaign on June 30,2014,whereby Sharpy placed a coupon in each package of razor blades sold,the coupons being redeemable for a premium.Each premium costs Sharpy $0.75,and five coupons must be presented by a customer to receive a premium.Sharpy estimated that only 60 percent of the coupons issued will be redeemed.For the six months ended December 31,2014,the following information is available:

What is the estimated liability for premium claims outstanding at December 31,2014?

• A)$15,000
• B)$20,000
• C)$21,000
• D)$22,500

Prepare and interpret a contribution format income statement.

Understand the behavior of mixed costs and their impact on business operations.

Understand the concept of mixed costs and how to categorize costs into fixed and variable.

Apply the least-squares regression method to estimate cost formulas.

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Definitions:

Times Interest Earned

A ratio that measures a company's ability to meet its interest obligations, calculated by dividing earnings before interest and taxes (EBIT) by the interest expense.

Financial Statements

Formal records of the financial activities and position of a business, person, or other entity.

Year 2

A term that could refer to the second year of a specific time period, project, or study.

Equity Multiplier

A financial ratio that measures the amount of a company's assets that are financed by its shareholders' equity.