13 Questions
True or false: Expenses can be categorized as direct, indirect, or underground expenses.
False
True or false: The profit center concept divides expenses equally between departments.
False
True or false: Tracking and controlling expenses is not necessary for profitability.
False
True or false: In the cost-centered approach to financial management, only top management is responsible for keeping the company profitable.
False
True or false: Overhead expenses are not required for a business to exist.
False
True or false: Net profit is calculated by subtracting fixed expenses from gross profit.
False
True or false: Gross profit is the total sales minus indirect costs.
False
True or false: Gross profit percentage is not affected by company goals and conditions.
False
True or false: Every business expense falls into the direct/indirect/overhead expense categories.
True
True or false: If overhead expenses are too high, negotiating with the landlord is not an option.
False
True or false: Direct expenses are related to specific transactions, indirect expenses are not related at all, and overhead expenses are partially related.
False
True or false: The direct/indirect/overhead expense approach is complicated to use.
False
True or false: Service managers do not need to be familiar with gross profit and percentage measures.
False
Study Notes
- Income is received in exchange for services and products delivered.
- Income can also include items of value received in exchange for services.
- Expenses are the costs or financial outlay involved in doing business.
- Control of expenses is essential for financial success.
- Expenses can be categorized as direct, indirect, or overhead expenses.
- Direct expenses are costs directly related to a specific transaction.
- Indirect expenses are costs used across many transactions or projects.
- Overhead expenses are costs required for the company to exist.
- Understanding expense characteristics is essential for effective expense analysis.
- Tracking and controlling expenses is necessary for profitability.
- Overhead expenses are necessary for a business to exist and are difficult to change.
- Overhead expenses include physical facilities and business office costs.
- Fixed expenses occur whether or not business is conducted.
- Variable expenses change based on the volume of work completed and sold.
- One item or transaction can create several types of expenses.
- Profit is the difference between income and expenses.
- Increasing profit is possible by increasing income or reducing expenses, or both.
- Profit margin is the percentage of profit generated for each dollar of sales.
- Gross profit is the total sales minus direct costs.
- Gross profit percentage is a performance indicator that shows if the shop is keeping its costs in control in relation to its sales.
- Gross profit percentage varies depending on company goals and conditions.
- Gross profit and percentage are primary measures of a service manager's performance.
- In some companies, service department only gets credit for labor and direct costs.
- Monthly financial statements indicate gross sales, direct costs, and gross profit.
- Overhead costs can affect net profit and should be spread out over a large volume of sales.
- If overhead expenses are too high, options include negotiating with landlord, cutting staff, or finding a new location.
- Direct expenses are related to specific transactions, indirect expenses are partially related, and overhead expenses are not related.
- Every business expense falls into one of these categories.
- The direct/indirect/overhead expense approach is simple to use.
- Service managers must be familiar with gross profit and percentage measures.
Test your knowledge of income and expense management with this informative quiz! With questions covering the fundamentals of income, expenses, and profitability, this quiz will help you sharpen your skills in controlling expenses, tracking income, and understanding the different types of expenses. Whether you're a seasoned business owner or just getting started, this quiz is the perfect way to brush up on your knowledge of income and expense management. So, let's get started and see how much you really know about managing your finances!
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