Which of the Following Methods May Not Be Appropriate for Estimating

question 148

Multiple Choice

Which of the following methods may not be appropriate for estimating bad debt expense?

• A) percentage of net credit sales
• B) percentage of outstanding accounts receivable
• C) aging of accounts receivable
• D) direct write off method

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Definitions:

Variable Costs

Expenses that vary directly with the level of production or sales volume, such as materials and labor.

Profitable

Generating revenue that exceeds the expenses, costs, and taxes needed to sustain the activity.

Average Total Cost

The cost per unit of output, calculated by dividing the overall production costs by the number of units produced.

Profit-maximizing

A strategy or point where a business reaches the highest possible profit level with given operational limits and market conditions.