Otis Is Interested in Buying a Franchise from Plentiful Inc

question 18

Multiple Choice

Otis is interested in buying a franchise from Plentiful Inc. This transaction, like other franchise deals, is regulated to protect

• A) certain types of anticompetitive agreements.
• B) franchisors from dishonest prospective franchisees.
• C) prospective franchisees from dishonest franchisors.
• D) the government's power to restrict freedom of contract.

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Definitions:

Absorption Costing

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

Variable Costing

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

Production Cost

The total expense incurred in manufacturing a product, including raw materials, labor, and overheads.

Unit Costs

The cost incurred to produce, store, and sell one unit of a product, including direct materials, labor, and overhead expenses.