28 Questions
Which of the following best describes the reason why the neighborhood kids are asking for the protagonist's help in starting their own lemonade businesses?
They want to learn from the protagonist's success
What does the protagonist realize they need when they start receiving numerous requests for help in starting lemonade businesses?
A consulting business
Who does the protagonist seek advice from regarding running two businesses?
Their favorite aunt, Jane
Which method of accounting can service businesses use to gain a tax advantage?
Cash Method
What is the main inventory item on a lemonade stand's Balance Sheet that will not be on a service company's Balance Sheet?
Inventory
What are the two categories in which service companies separate costs on their Income Statement?
Cost of Services and Expenses
Which accounting method does a service company use to separate its overhead costs from its direct costs?
Accrual Method
Which of the following items would be included in the Cost of Services for the Real Good Lemonade Consulting Company?
The $2.00 per day payment to the consultants
What is the Gross Profit (Income) for the Real Good Lemonade Consulting Company?
$27.00
Which of the following items would be included in the Expenses for the Real Good Lemonade Consulting Company?
The $2.00 payment to Michael for administrative work
What is the Net Income for the Real Good Lemonade Consulting Company?
$14.00
Which category do travel costs fall under in the income statement?
Cost of Services
When are consultants' wages included in the Cost of Services category?
When they are working on a project
Why is it important to separate R&D expenses in a service company?
To keep track of capital investment in new products
What are 'other expenses' in the income statement?
Loss or gain from selling a fixed asset
What is the main difference between a service company's Income Statement and a lemonade stand's Income Statement?
A service company's Income Statement only includes Sales and Expenses, while a lemonade stand's Income Statement includes Cost of Goods Sold and Gross Profit.
Why is it important for a service company to separate its overhead costs from its direct costs?
Separating overhead costs from direct costs allows the company to better understand and manage its expenses and determine the profitability of its services.
What are the two categories that service companies typically separate costs into on their Income Statement?
The two categories are Cost of Services (or Cost of Sales) and Expenses.
What is the purpose of the chapter on service businesses in the book?
The purpose is to help readers better understand service company issues and accounting, and practice determining which items go into Cost of Services and Expenses on an Income Statement.
What is the total revenue for the Real Good Lemonade Consulting Company?
$48.00
What is the Cost of Services for the Real Good Lemonade Consulting Company?
$21.00
What is the Gross Profit (Income) for the Real Good Lemonade Consulting Company?
$27.00
What is the Net Income for the Real Good Lemonade Consulting Company?
$14.00
What is the protagonist's initial reaction to the neighborhood kids asking for help in starting their own lemonade businesses?
The protagonist decides they will not work with anyone near enough to open a stand in their own neighborhood.
What realization does the protagonist have when they receive numerous requests for help in starting lemonade businesses?
The protagonist realizes they need some consulting themselves and call their favorite aunt, Jane, for advice.
What concern does the protagonist have about running both their lemonade stand and a consulting business?
The protagonist is unsure how they can run two businesses as they are only one person.
What are the potential problem areas in the Real Good Lemonade Company's Income Statement?
Potential problem areas in the Real Good Lemonade Company's Income Statement are sales and marketing expenses, general and administrative expenses, and research and development expenses.
How can the company improve its profitability?
The company can improve its profitability by efficiently using the consultants' time, separating R&D expenses to track capital investment in new products, and ensuring consultants are working on billable hours for clients.
Test Your Consulting Skills: Solve Aunt Sue's Dilemma and Help Amanda and Laura
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