Business Sectors Quiz

Questions and Answers

Which of these are the most common business sectors? (Select all that apply)

Manufacturing Companies (correct)

Merchandising Companies (correct)

Investment Companies

Service Companies (correct)

What are Service Companies?

Companies that provide services or intangible products.

What are Merchandising Companies?

Companies that purchase and sell tangible products without changing their form.

What do Manufacturing Companies do?

Convert raw materials into finished goods. Signup and view all the answers

The value chain includes Research & Development, Design, Production, Marketing, Distribution, and ______.

Customer Service Signup and view all the answers

What is Research and Development?

The process of researching and developing new or improved products or services. Signup and view all the answers

What does the Design phase entail?

Detailed engineering of products and services. Signup and view all the answers

What are Production or Purchases?

Resources used to produce a product or service, or to purchase finished merchandise. Signup and view all the answers

What is Marketing?

Promotion and advertising of products or services. Signup and view all the answers

What is Distribution?

Delivery of products or services to customers. Signup and view all the answers

What is Customer Service?

Support provided for customers after the sale. Signup and view all the answers

What is a Cost Object?

Anything for which managers want a separate measurement of costs. Signup and view all the answers

What is a Direct Cost?

A cost that can be easily traced to the cost object. Signup and view all the answers

What is an Indirect Cost?

A cost that relates to the cost object but cannot easily be traced to it. Signup and view all the answers

What is Total Cost?

The cost of all resources used throughout the value chain. Signup and view all the answers

What is Inventoriable Product Cost?

Costs incurred during the production or purchases stage of the value chain. Signup and view all the answers

What is a Period Cost?

Costs expensed in the period they are incurred. Signup and view all the answers

What is Prime Cost?

The combination of direct materials and direct labor costs. Signup and view all the answers

Match the following terms to their definitions:

Conversion Cost = Direct labor and manufacturing overhead costs. Administrative Costs = Executive and clerical costs associated with management. Sunk Cost = A cost that has already been incurred and cannot be changed. Variable Cost = A cost that varies in total with changes in activity level. Signup and view all the answers

What is Work in Process?

Units of product that are only partially complete. Signup and view all the answers

Study Notes

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.

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Description

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.