Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

4. Merchandising Operations

Net Sales

Financial Accounting

4. Merchandising Operations

Net Sales

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Multiple Choice

Why should variable expenses be planned after fixed expenses when preparing a budget for net sales?

Because variable expenses do not affect net sales.

Because variable expenses are always higher than fixed expenses.

Because fixed expenses must be paid regardless of sales volume, so they take priority in planning.

Because fixed expenses can be adjusted more easily than variable expenses.

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Verified step by step guidance

Understand the concept of fixed expenses: Fixed expenses are costs that remain constant regardless of the level of sales or production, such as rent, salaries, and insurance. These expenses must be paid regardless of the company's performance.

Understand the concept of variable expenses: Variable expenses are costs that fluctuate based on sales volume or production levels, such as raw materials, commissions, and shipping costs. These expenses are directly tied to the company's activity levels.

Recognize the priority in budgeting: Fixed expenses take priority in planning because they are mandatory and must be covered regardless of sales volume. This ensures the business can continue operating even during periods of low sales.

Plan variable expenses after fixed expenses: Once fixed expenses are accounted for, variable expenses can be planned based on projected sales volume. This allows for flexibility in adjusting these costs according to expected revenue.

Understand the relationship to net sales: Fixed expenses do not depend on net sales, while variable expenses are influenced by sales volume. Therefore, planning fixed expenses first ensures the business's essential obligations are met before addressing costs that vary with sales.