Question 1

________ is what remains when you subtract fixed and variable costs and taxes from revenues.
A) Operating profit
B) Gross profit
C) Net profit
D) Gross margin

Accepted Answer

Net profit is the amount earned after subtracting all expenses, including fixed and variable costs and taxes, from revenues. Gross profit only subtracts the cost of goods sold from revenues, while operating profit subtracts all operating expenses from revenues. Gross margin is the percentage of revenues that remain after subtracting the cost of goods sold.

Question 2

The percentage of value of an asset subtracted each year until the value becomes zero, to reflect wear and tear on the asset, is called ________.
A) depreciation
B) inventory
C) deductible
D) reduction

Accepted Answer

The definition provided fits the concept of depreciation, which is a method used for accounting purposes to allocate the cost of a tangible asset over its useful life, with the objective of matching the cost of the asset to the revenues that it generates. This allocation is typically based on a formula that considers the original cost of the asset, the estimated salvage value, and the estimated useful life, among other factors. Depreciation is not the same as a reduction, which could refer to any decrease in value, nor is it related to inventory, which is the stock of goods that a business holds to sell to customers. A deductible, on the other hand, is an expense that can be subtracted from taxable income to reduce the amount of taxes owed. While depreciation can have a tax benefit, it is not necessarily a deductible expense in all cases.

Question 3

Carla sells hot coffee, cider and tea from a sidewalk cart near Wall Street in New York City. Last month she sold $4,500 worth of product to 1,000 customers. She spent $800 on buying her beverages in bulk. Her monthly costs are: Utilities = $100, Salary = $2,000, Advertising = $0, Insurance = $0, Interest = $0, Rent (cart) = $600, Depreciation = $0. Calculate Carla's average sale per customer.
A) $4.50
B) $4.00
C) $5.00
D) $0.80

Accepted Answer

Carla's revenue = $4,500
Cost of goods sold (COGS) = $800
Expenses = $100 + $2,000 + $0 + $0 + $600 + $0 = $2,700
Profit = Revenue - COGS - Expenses = $4,500 - $800 - $2,700 = $1,000
Average sale per customer = Revenue ÷ Number of customers = $4,500 ÷ 1,000 = $4.50. Therefore, the answer is A.

Question 4

Jenny is worried because when she calculates the EOU for her business, the gross profit is too low. Explain whether or not she could improve it by finding an office with a lower monthly rent.

Accepted Answer

The answer of Jenny is worried because when she calculates...

Question 5

Fixed operating costs can change over time.

Accepted Answer

Fixed operating costs may change due to factors such as inflation, changes in rent or salaries, or upgrades to equipment or technology. However, they are still considered fixed because they do not vary with changes in production or sales levels.

Question 6

In the phrase I SAID U R + "Other FXs", UR stands for ________.
A) utilities, rent
B) unknown rates
C) unforeseen revisions
D) unforeseen rates

Accepted Answer

"UR" in this context stands for "utilities, rent," which is a common abbreviation used in financial contexts.

Question 7

Record keeping for a very small business can be accomplished by a journal and files for storing ________.
A) records of transactions
B) details of seed capital
C) details of start-up expenses
D) details of marginal costs

Accepted Answer

A journal can be used to record all transactions made by the business, such as sales, purchases, and expenses. These records should then be organized and stored in appropriate files for easy access and reference. While keeping track of details such as seed capital, start-up expenses, and marginal costs may be helpful for the business, they are not necessarily the primary records that need to be kept for basic record-keeping purposes.

Question 8

The difference between a receipt and an invoice is that the receipt records ________.
A) sales
B) interest paid
C) purchases
D) credit transactions

Accepted Answer

A receipt records purchases, confirming that a payment has been made for goods or services received.

Question 9

Describe how an entrepreneur should protect his/her financial records.

Accepted Answer

The answer of Describe how an entrepreneur should protect his/her...

Question 10

Carla sells hot coffee, cider and tea from a sidewalk cart near Wall Street in New York City. Last month she sold $4,500 worth of product to 1,000 customers. She spent $800 on buying her beverages in bulk. Her monthly costs are: Utilities = $100, Salary = $2,000, Advertising = $0, Insurance = $0, Interest = $0, Rent (cart) = $500, Depreciation = $0. What are Carla's fixed costs?
A) $2,000
B) $2,100
C) $2,600
D) $2,700

Accepted Answer

Carla's fixed costs include utilities ($100), salary ($2,000), and rent ($500), totaling $2,600.

Question 11

If a business sells 5,000 units for a total profit of $200,000, what is its profit per unit?
A) $50
B) $400
C) $40
D) $500

Accepted Answer

To find the profit per unit, we need to divide the total profit by the number of units sold. Thus, $200,000/5,000 units = $40 per unit. Therefore, the answer is C.

Question 12

________ is a review of financial and business records to ascertain integrity and compliance with standards and laws, particularly by the U.S. Internal Revenue Service.
A) Scrutiny
B) Assessment
C) Due diligence
D) Audit

Accepted Answer

Audit is the best choice as it specifically refers to a review of financial and business records for the purpose of determining compliance with standards and laws, particularly by the U.S. Internal Revenue Service. Scrutiny and assessment may have similar meanings, but are not as specific to financial and legal compliance as an audit. Due diligence is a more general term that can refer to a range of investigations into a company's operations, including financial and legal compliance, but again, an audit is specific to financial and legal compliance.

Question 13

Why is it best to pay expenses for your business with a check, not with cash?
A) A check can't be traced.
B) Cash is easier to lose.
C) A check provides written proof of payment.
D) Paying with a check keeps check printing companies and banks in business.

Accepted Answer

Paying with a check provides written proof of payment, which is important for record keeping and accounting purposes. Cash does not provide the same level of documentation and can be easier to lose or misplace.

Question 14

The systematic recording, reporting, and analysis of the financial transactions of a business is called ________.
A) accounting
B) reconciliation
C) cost analysis
D) cash flow analysis

Accepted Answer

Accounting is the process of recording, classifying, and summarizing financial transactions to provide information that is useful in making business decisions. Reconciliation is the process of comparing transactions in accounting records with those on bank statements to ensure accuracy. Cost analysis is the process of identifying and tracking the costs associated with a particular project or activity. Cash flow analysis is the process of analyzing the inflows and outflows of cash in a business to determine its liquidity and ability to meet financial obligations. Therefore, only option A is the correct answer.

Question 15

Give three reasons to keep good records every day.

Accepted Answer

The answer of Give three reasons to keep good records...

Question 16

Depreciation is the percentage of value of an asset added each year to reflect wear and tear on the asset.

Accepted Answer

Depreciation is the allocation of the cost of an asset over its useful life, reflecting the decrease in value due to wear and tear, not an addition of value.

Question 17

Which of the following is not a category of fixed costs? A) rent B) advertising C) capital D) depreciation

Accepted Answer

Rent, advertising, and depreciation are all categories of fixed costs. Capital refers to the funds used to start or expand a business and is not a category of fixed cost.

Question 18

Total Revenue divided by ________ = units sold.
A) selling price
B) profit
C) total operating costs
D) cost

Accepted Answer

Total revenue is calculated by multiplying the selling price per unit by the total number of units sold. Therefore, to calculate units sold, we divide total revenue by the selling price per unit.

Question 19

If a business has total gross profit of $14,720 and total operating costs of $11,500, what is its net profit?
A) $3,000
B) $3,220
C) $1,150
D) $0

Accepted Answer

To find the net profit, you need to subtract operating costs from gross profit.

Net Profit = Gross Profit - Operating Costs

Net Profit = $14,720 - $11,500

Net Profit = $3,220

Therefore, the best choice is option B.

Question 20

Fixed operating costs ________.
A) are not included in COGS
B) are not direct costs of creating each product
C) include expenses like rent
D) All of the above.

Accepted Answer

Fixed operating costs are the expenses that do not vary with the level of production or sales volume. They are not included in COGS and are not direct costs of creating each product. Examples of fixed operating costs include rent, salaries, insurance, and depreciation. Therefore, option D is correct.

Quiz 7: Understanding and Managing Start-Up, Fixed, and Variable Costs

________ is what remains when you subtract fixed and variable costs and taxes from revenues.

The percentage of value of an asset subtracted each year until the value becomes zero, to reflect wear and tear on the asset, is called ________.

Jenny is worried because when she calculates the EOU for her business, the gross profit is too low. Explain whether or not she could improve it by finding an office with a lower monthly rent.

Fixed operating costs can change over time.

In the phrase I SAID U R + "Other FXs", UR stands for ________.

Record keeping for a very small business can be accomplished by a journal and files for storing ________.

The difference between a receipt and an invoice is that the receipt records ________.

Describe how an entrepreneur should protect his/her financial records.

If a business sells 5,000 units for a total profit of $200,000, what is its profit per unit?

________ is a review of financial and business records to ascertain integrity and compliance with standards and laws, particularly by the U.S. Internal Revenue Service.

Why is it best to pay expenses for your business with a check, not with cash?

The systematic recording, reporting, and analysis of the financial transactions of a business is called ________.

Give three reasons to keep good records every day.

Depreciation is the percentage of value of an asset added each year to reflect wear and tear on the asset.

Which of the following is not a category of fixed costs?

Total Revenue divided by ________ = units sold.

If a business has total gross profit of $14,720 and total operating costs of $11,500, what is its net profit?

Fixed operating costs ________.