Brothers Ronnie and Jacob Are Both in College; Ronnie Is

question 58

Multiple Choice

Brothers Ronnie and Jacob are both in college; Ronnie is a senior and Jacob a sophomore. They’re both majoring in business administration and want to open a small business a few years after graduation. They understand that it’s important to gain more management experience and build good credit ratings. Ronnie wants more security in his work and would be satisfied working with an older partner until he “learns the ropes.” More than Jacob, he’d prefer a business that’s been established for a few years. Although he likes a certain degree of independence, he’s willing to follow directions and take advice. Jacob, on the other hand, wants more freedom to make his own choices and to succeed or fail on his own merits. He’s quite creative and likes to set his own rules.
-Among the disadvantages of business ownership,both brothers would probably balk at the prospect of _____.

• A)time commitment
• B)stress
• C)undesirable duties
• D)financial risk

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Definitions:

Manufacturing Overhead

All indirect costs associated with manufacturing beyond direct materials and direct labor, such as utilities and maintenance.

Variable Costs

Costs that vary directly with the level of production or sales volume.

Fixed Costs

Fixed expenses unaffected by production or sales volumes, like rent, salaries, and insurance premiums.

Relevant Range

The range of activity within which the assumptions about variable and fixed cost behavior are valid.