1. Intel makes microchips from raw materials acquired from suppliers. Intel is a:

A) service company.

B) retail company.

C) manufacturer.

D) merchandising company.

2. BetterBuy purchases computers from companies like Hewlett Packard and IBM and sells them to consumers. BetterBuy is a:

A) merchandising company at the retail level.

B) service company.

C) merchandising company at the wholesale level.

D) manufacturer.

3. Which of the following is a merchandising company?

A) General Motors

B) H&R Block

C) The Gap

D) Proctor & Gamble

4. Which of the following is an activity common to the operations of merchandising, manufacturing, and service companies?

A) Producing the product

B) Incurring operating expenses

C) Buying goods or raw materials

D) Selling a physical product

5. Which of the following is an activity in the operations of a manufacturer, but not in the operations of a merchandising or service company?

A) Selling goods to consumers

B) Receiving cash

C) Selling goods to other firms

D) Buying raw materials

6. A company buys footwear and clothing from manufacturers, which it resells to discount stores in a large urban area. This company is an example of a:

A) wholesale merchandising company.

B) service company.

C) retail merchandising company.

D) secondary service company.

7. The receipt of cash is one of the operating activities of:

A) companies that sell goods but not companies that sell services.

B) companies that sell to consumers but do not sell to other companies.

C) merchandising, manufacturing, and service companies.

D) companies that sell goods they bought from others but not of companies that make the goods they sell.

8. A series of activities that generates revenues and collects cash from customers is called:

A) the operating cycle.

B) the financing cycle.

C) the accounting cycle.

D) the perpetual cycle.

9. Sleepy Head Coffee Shop buys coffee, mugs, and pastries from Morning Show Co. for sale to consumers. What type of company is Sleepy Head Coffee Shop?

A) Retail merchandiser

B) Wholesale merchandiser

C) Manufacturer

D) Service business

10. Which line item would be found on a merchandiser's balance sheet and not on a service firm's?

A) Supplies

B) Cost of Goods Sold

C) Inventory

D) Sales Revenue

11. Which of the following is not a primary goal of inventory management?

A) Obtaining the lowest cost of inventory.

B) Ensuring sufficient quantities of inventory are available to meet customers' needs.

C) Ensuring inventory quality meets customers' expectations and company standards.

D) Minimizing the costs of acquiring and carrying inventory.

12. Carrying insufficient quantities of inventory on hand:

A) would not affect the company's profitability.

B) may result in lost sales.

C) has little effect on customer satisfaction.

D) will increase the costs of carrying inventory.

13. Which of the following is not one of the primary goals of inventory management?

A) Maintain a sufficient quantity of inventory to meet customer needs.

B) Ensure inventory quality meets customers' expectations and company standards.

C) Minimize the cost of acquiring and carrying inventory (including costs related to purchasing, production, storage, spoilage, theft, obsolescence, and financing).

D) Minimize the quantity of ending inventory.

14. Which of the following would be in the raw materials inventory of a company making ice cream?

A) Milk and cream used to make the ice cream.

B) Ice cream that has been made but is freezing to the level required for shipping.

C) Frozen ice cream that is waiting to be shipped to retailers.

D) Ice cream in process awaiting the addition of nuts.

15. Which of the following would be in the work in process inventory of a company making ice cream?

A) Milk and cream used to make the ice cream.

B) Ice cream that has been made but is freezing to the level required for shipping.

C) Frozen ice cream that is waiting to be shipped to retailers.

D) Ice cream that is in the freezers of retailers awaiting sale to consumers.

16. The potential advantages of extending credit to customers include all of the following except higher:

A) wage expenses.

B) profits.

C) customer satisfaction.

D) revenues.

17. There are advantages and disadvantages to extending credit to customers. Which of the following statements below expresses the general reason for extending credit?

A) Lower sales revenues exceed bad debt savings.

B) Wage cost savings exceed delayed receipt of cash.

C) Gross profits exceed bad debt costs.

D) The speed of cash receipts exceeds bad debt costs.

18. Which of the following statements about the tradeoffs of extending credit is not correct?

A) Extending credit to at least some customers is necessary in a competitive market to avoid losing sales to competitors.

B) Even if a company were to collect in full from customers, there would be other additional costs introduced by extending credit to customers.

C) Even though additional costs are incurred if credit is extended, a company expects that the additional revenue will be more than sufficient to offset the additional costs.

D) Even if there are no bad debts from credit sales, the delayed receipt of cash will always increase additional costs beyond the increased revenue from the credit sales.

19. Extending credit to customers will introduce all of the following additional costs except:

A) increased wage costs will be incurred to hire people to evaluate whether each customer is creditworthy, track how much each customer owes, and follow up to collect the receivable from each customer.

B) bad debt costs will result when amounts cannot be collected from customers.

C) delayed receipt of cash may result in requiring the company to take out short-term loans and incur interest costs.

D) decreased gross profit from reduced sales.

20. All of the following will likely be incurred by a company that extends credit except:

A) increased revenues.

B) increased wage costs.

C) increased advertising expenses.

D) a delay in the receipt of cash.

21. Companies are concerned about the cost of extending credit for all the following reasons except the:

A) time delay in receiving payment.

B) expense of the extra goods that must be produced or purchased for resale.

C) risk of nonpayment.

D) administrative costs associated with extending credit.

22. The potential disadvantages of extending credit include all of the following except:

A) increased bad debt costs.

B) customers buying too much.

C) the need to hire employees to undertake collection efforts.

D) higher wage costs in the accounting department.

23. Which of the following statements about extending credit is not correct?

A) It is common for companies to sell on account to other companies.

B) Some companies extend credit to individual consumers.

C) Bad debts arise from credit sales to individual consumers, but not from credit sales to other companies.

D) When credit is available, customers often buy more products and services.

24. If a company did not extend credit to customers:

A) gross revenue would increase.

B) costs would increase but so would sales revenue.

C) costs would decrease but so would sales revenue.

D) gross profit would increase.

25. Although there are some clear disadvantages associated with extending credit to customers, such as bad debt costs, most managers believe a particular advantage outweighs the costs. To which primary advantage do they refer?

A) Increased labor costs

B) Increased bad debt expense

C) Delayed receipt of cash

D) Additional sales revenue