Most Companies That Sell CDs by Mail Deliver in 1

question 3

Multiple Choice

Most companies that sell CDs by mail deliver in 1 to 2 weeks.Mosey Music Inc.takes 4 weeks to deliver CDs.Which of the following is likely to be true in this case?

• A)Mosey Music will lose all its customers.
• B)Mosey Music will not lose customers because the good in question is CDs, which has substitutes.
• C)Mosey Music will have to charge more for its CDs to make up for the business it loses through slow delivery.
• D)Mosey Music will have to charge less for its CDs to compete with firms that deliver CDs faster.
• E)Mosey Music will be able to charge the same amount for its CDs as other firms do as long as the quality of the CDs is the same.

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Definitions:

Sales Warranty Accrual Method

An accounting method where a company estimates the cost of warranty claims expected to arise from current sales and records this as an expense when the sale occurs.

Warranty Expense

The estimated cost of honoring product warranties, which companies recognize to match expenses with related revenues.

Estimated Warranty Costs

Projected expenses that a company expects to incur to repair or replace products during a warranty period.

Estimated Liability

A financial obligation that is expected to occur but has not been finalized in amount or timing.