Entrepreneurship- Chapter 26: The Cost of Doing Business

In a service business, which of the following does not apply? A) COGS B) EOU C) contribution margin D) variable expenses

A) COGS

The amount per unit that a product contributes toward a business's profit before fixed expenses are subtracted is the A) unit of sale B) contribution margin C) economy of scale D) EOU

B) contribution margin

In a wholesale business, the cost of goods sold does not include A) materials B) labor C) commissions D) shipping and handling

B) labor

The variable expense that is associated with each unit of sale is called A) OFX B) UR C) COGS D) I SAID UR

C) COGS

An example of a typical variable expense is A) the cost of electricity B) yearly rent C) a commission for salespeople D) Internet access

C) a commission for salespeople

A retailer that sells sweaters would typically use a unit of sale based on A) one dozen sweaters bought from the manufacturer B) one dozen sweaters bought from the wholesalers C) one sweater sold to a customer at the regular price D) one sweater sold to a customer at the sale price

C) one sweater sold to a customer at the regular price

A unit of sale is A) what a customer actually buys from you B) the amount of product or service you use to calculate your costs and profit C) the basic building block of your business D) all of the above

D) all of the above

An example of a fixed expense is A) rent B) salaries C) utilities D) all of the above

D) all of the above

The cost reduction made possible by spreading a business's costs over a larger volume of purchases is called A) amortizing B) buying in bulk C) volume discount D) economy of scale

D) economy of scale

A manufacturer and a wholesaler both would include which of the following economics of one unit? A) labor and materials B) variable expenses C) commissions D) shipping and handling

D) shipping and handling

T or F A wholesaler's cost of goods sold per unit includes labor.

False

T or F If you operate a service business, you cannot calculate your contribution margin by using a unit of sale.

False

T or F Salaries and utilities are examples of variable expenses.

False

T or F The unit of sale for a wholesaler is the same as for a retailer.

False

T or F If you have created an app that you are selling on Google Play, your economics of one unit will include the commission you pay to Google Play for every sale as a variable expense.

True

T or F If you sell silk-screened T-Shirts for $15, your COGS is $5 and your other variable expenses per unit are $3, your contribution margin per unit is $7.

True

T or F Shipping and handling charges are examples of variable expenses.

True

T or F The contribution margin for one unit takes into account the business's variable expenses.

True

T or F The variable expense that is associated with each unit of sale is called the cost of goods sold.

True

T or F To decrease the cost of materials per unit, try looking for a less expensive supplier.

True

The variable expense that is associaated with each unit of sale is called COGS, which stands for______________.

cost of goods sold

EOU stands for___________.

economics of one unit

The cost reduction made possible by spreading costs over a larger volume is called a ____________.

economy of scale

Rent is an example of a ________ expense.

fixed

An expense that isn't affected by the number of items a business produces is a _________.

fixed expense

Because a wholesaler buys finished products from a manufacturer, its cost of goods sold per unit doesn't include_________.

labor

If a business has many similar products, they don't need a EOU for each one, but one would instead use a _________ EOU.

typical

A business expense that changes based on the amount of product or service sold is a __________.

variable expense

If your business sells four types of necklaces that cost $10, $12, $14, and $16 each respectively, your average cost per unit is______.

$13

If your selling price per unit is $22, your COGS is $6, and your other variable expenses per unit are $7, your contribution margin per unit is________.

$9