Which of the Following Exemplifies the Role and Purpose of the Sales/collection

question 27

Multiple Choice

Which of the following exemplifies the role and purpose of the sales/collection process?

• A)American Home Shield sells warranties to new homeowners.
• B)New homeowners pay cash to American Home Shield for warranties.
• C)Both American Home Shield sells warranties to new homeowners and new homeowners pay cash to American Home Shield for warranties.
• D)Neither American Home Shield sells warranties to new homeowners nor new homeowners pay cash to American Home Shield for warranties.

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Definitions:

Variable Costing

An accounting method that only includes variable production costs (direct materials, direct labor, and variable manufacturing overhead) in product costs.

Net Operating Income

The income generated from normal business operations, calculated by deducting operating expenses from gross income.

Absorption Costing

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

Fixed Costs

Costs that remain constant in total regardless of changes in the level of the business activity or production volume.