John Moved His Office from a Building He Was Renting

question 94

Multiple Choice

John moved his office from a building he was renting downtown to the carriage house he owns behind his house. Which of the following statements shows how his costs change?​

• A)Both his explicit and implicit costs will rise.
• B)His explicit costs will rise, while his implicit costs will fall.
• C)Both his explicit and implicit costs will fall.
• D)His explicit costs fall, while his implicit costs will rise.
• E)His explicit costs will rise, while his implicit costs will remain the same.

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Definitions:

Inventory Valuation Methods

Different approaches (such as FIFO, LIFO, and weighted average cost) used to assess the cost of goods sold and ending inventory value.

Common Size Income Statements

Financial statements that present all line items as a percentage of a base figure, facilitating comparison across different-sized companies.

FIFO vs. LIFO

Refers to the accounting methods for inventory management; FIFO stands for First-In, First-Out, indicating that the oldest inventory items are recorded as sold first, whereas LIFO stands for Last-In, First-Out, where the most recently produced or acquired items are the first to be expensed.

Economic Value Added

A measure of a company's financial performance based on the residual wealth calculated by deducting the cost of capital from its operating profit.