Chapter 7 Understanding Smart Selling

Question 1

Variable cost

Answer 1

Expenses that vary directly with changes in the production or sales volume

Question 2

How much cash or emergency funds should you keep in your business?

Answer 2

Half of your start up cost

Question 3

Two categories of variable costs

Answer 3

1. Cost of goods sold or cost of services sold

2. other variable cost including commission and shipping and handling charges

Question 4

Eight most common categories of fixed operating costs.

Answer 4

Insurance 
Salaries 
Advertising 
Interest 
Depreciation 
Utilities 
Rent 
Other Fixed eXpenses

Question 5

Do fixed operating costs change over time? Two examples of these costs.

Answer 5

Yes, advertising, heating and cooling cost

Question 6

Four reasons to keep good records every day

Answer 6

1. Show you how to make the business more profitable
2. Document profitability and cash position
3. Prove that payments have been made
4. Take advantage of tax deductions

Question 7

Eight common categories of costs.

Answer 7

1. Variable cost
2. Fixed costs
3. Capital equipment
4. Investment
5. Loans
   6 revenue
6. Inventory
7. Other cost

Question 8

What does fixed operating cost mean

Answer 8

Expenses that do not vary with changes in the volume of production or sales

Question 9

Fixed cost

Answer 9

Expenses that must be paid regardless of whether sales are being generated

Question 10

Net profit

Answer 10

The remainder of revenues minus fixed and variable cost and Taxes

Question 11

Cash accounting

Answer 11

A system wherein transactions are recorded when cash is paid out or received

Question 12

Accrual method

Answer 12

Transactions are recorded at the time of occurrence, regardless of the transfer of cash

Question 13

EOU

Answer 13

Economics of one unit, The amount of gross profit that is earned on each unit of the product or service a business sells