Debbie Acquired a Franchise to Operate a Donut Shop from Dollar

question 35

Multiple Choice

Debbie acquired a franchise to operate a donut shop from Dollar Donuts, Inc., for $100,000. She incurred an additional $4,000 in legal costs to negotiate the terms with the franchiser. In five years, the franchise contract will be renegotiated. The current contract also states that there will be a $3,000 annual fee plus a two percent charge based on the store's annual revenue, which is expected to average 90,000 per year. The franchise cost that should be capitalized is

• A) $ 88,000
• B) $ 92,000
• C) $100,000
• D) $104,000

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Definitions:

Input

refers to the resources, materials, or labor used in the production of goods and services.

Units

Basic quantities or measurements used to express variables in various contexts, such as items, people, or currency.

Labor Demand Curve

A graphical representation showing the quantity of labor that firms are willing and able to hire at different wage levels, typically downward sloping.

Imperfectly Competitive

A market structure where individual sellers have some control over the market price due to product differentiation or other factors.