Business Sectors Quiz

Most Common Business Sectors

• Service companies offer intangible products like consultancy, healthcare, and education.
• Merchandising companies buy and sell tangible goods without altering their form, maintaining inventory ready for sale.
• Manufacturing companies transform raw materials into finished products using labor and equipment.

Service Companies

• Examples include law offices, medical practices, hair salons, and internet service providers.
• Services are intangible and do not require inventory for resale.

Merchandising Companies

• Purchase goods to sell directly to customers.
• Examples include major retailers like Wal-Mart, Kmart, and Target.
• They own the inventory which is ready for resale.

Manufacturing Companies

• Utilize labor and equipment to convert raw materials into products.
• Maintain three inventory types: raw materials, work in process, and finished goods.
• Notable examples are Bombardier Inc. and McCain Foods Ltd.

The Value Chain

• Represents steps from research and development through to customer service.
• Key stages include:
  • Research & Development
  • Design
  • Production
  • Marketing
  • Distribution
  • Customer Service

Cost Concepts

• Cost objects are items for which costs are measured separately, such as jobs or products.
• Direct costs can be directly traced to cost objects; indirect costs cannot.
• Total cost comprises all resources throughout the value chain.

Product Costs

• Inventoriable product costs are incurred during production or purchases.
• Period costs are operating expenses expensed when incurred, not linked to inventory.
• Prime costs combine direct material and direct labor costs.
• Conversion costs include direct labor and manufacturing overhead.

Inventory Types & Manufacturing Costs

• Merchandisers hold a single type of inventory; service companies have none.
• Manufacturers have three inventory types: raw materials, work in process, and finished goods.
• Manufacturing costs break down into direct materials, direct labor, and manufacturing overhead.

Cost Behavior

• Fixed costs remain constant within a relevant range, while variable costs fluctuate with activity levels.
• Opportunity costs represent benefits lost when one option is chosen over another.
• Administrative costs encompass management-related expenses not tied to manufacturing or selling.

Additional Cost Concepts

• Common costs support multiple cost objects but cannot be traced individually.
• Sunk costs are incurred expenses that cannot be altered by future decisions.
• Differential costs and revenues indicate changes in costs or revenues between alternatives.

Inventory and Production

• Direct materials are integral to the finished product and easily traced.
• Finished goods are complete products awaiting sale.
• Work in process comprises partially completed items.

Cost Schedules

• Schedule of cost of goods manufactured details costs for direct materials, labor, and overhead during a period.
• Selling costs relate to expenses incurred in securing customer orders and delivering products.

Test your knowledge on the most common business sectors, including service, merchandising, and manufacturing companies. This quiz will help you understand different types of businesses and their roles in the economy.