Danny Applied for and Received a Grant of Licence to Operate

question 95

Multiple Choice

Danny applied for and received a grant of licence to operate a popular franchise known as "Paul Coffey's Coffee".As part of the application he was required to pay a significant franchise fee that was loaned to him by his rich uncle.The building was "custom built" in accordance with the franchisor's requirements.Danny also agreed as part of the franchise agreement to make ongoing payments for management services and contributions to the cost of advertising campaigns.Danny has a friend in Venezuela who agrees to ship him coffee beans at a bargain-basement price.During the first day of operations,Danny receives a call from a representative of the franchisor that there is a problem.As one might expect in these circumstances,the problem is most likely:

• A)his friend's coffee beans do not meet the requirements of food and drug regulations.
• B)the coffee Danny is serving tastes slightly different than the brand usually served at "Paul Coffey's Coffee".
• C)Danny's friend was not named on the application for franchise as a potential supplier.
• D)Danny's franchise agreement includes an exclusive supply agreement requiring Danny to purchase coffee beans solely from the franchisor.
• E)the coffee bean bags from Venezuela do the match the franchisor's colours.

---

Definitions:

Activity-based Costing

A costing method that assigns overhead and indirect costs to specific activities, providing more accurate product costing.

Activity Cost Pools

Aggregations of all the costs associated with particular activities, used in activity-based costing to allocate costs more accurately.

Activity Measures

Metrics used to assess the efficiency and performance of different business activities, often in the context of activity-based costing.

Overhead Costs

Expenses not directly tied to the production of goods or services, such as rent, utilities, and insurance.