Chapter 10 Check Your Understanding

Which of the following is not a common fixed expense?

• rent

• labor

• salaries

• utilities

Expenses that are not affected by the number of products a business sells is called

• Variable expenses

• fixed expenses

• contribution margin

• selling expenses

Using the straight-line method of depreciation, what is the annual depreciation expense for an automobile that costs $30,000.00, has a five year life for the business, and can then be sold for $10,000.00? Hint:  (cost-selling price after 5 years)/ 5 years

• 7,000

• 6,000

• 5,000

• 4,000

Fixed expenses

• can never change

• change every year

• can change from time to time

• change in relation to products sold

One example of other variable expense would be

• commissions

• labor

• materials

• supplies

Expenses that change based on the quantity of goods a business sells in a given period of time are called

• fixed expenses

• variable expenses

• fluctuating expenses

• selling expenses

Which of the four types of business does not typically sell products?

• manufacturing

• retail

• service

• wholesale

Which of the following is not used in determining the contribution margin?

• variable expenses

• fixed expenses

• costs of goods sold

• other variable expenses

In a service business, an entrepreneur charges $500 for the job, pays a commission of 10% of sales, and has a cost of services sold per unit of $100.  What is the entrepreneur's contribution margin per unit? Hint:(500 * 10%)=commission   then 500-(100 + 50)=contribution margin

• 350

• 300

• 395

• 400

In a wholesale business, which of the following would you not expect to see in an EOU?

• materials

• other variable expenses

• total variable expenses

• contribution margin