Question

1, Standardization of products and manufacturing processes across markets is a strategy that :

A, Increased market size

B, Return on investment

C, Economies of scale

D, Location advantages

2, A company paid its current month's utility bill. How will this business transaction ?

A, Increase assets and increase liabilities

B, Increase assets and decrease owner's equity

C, Decrease assets and increase liabilities

D, Decrease assets and decrease owner's equity

Answer 1

Solution:

PART 1

Option C is the correct answer " Economies of Scale"

Explanation:

Economies of Scale mean cost saving by an increased level of production. With the help of standardization of product, the company can buy inputs like raw material in greater volume as per the need of production for all good across all market helps the company to negotiate and ask for a discounted price which in turn save cost to the company.

Part 2

Option D is the correct answer " Decrease in assets and Decrease in owners equity.

Explanation:

This question is based on the Accounting equation concept in the double accounting system.

Accounting equation is

Assets = Liabilities + Capital

Any transaction which business undertake must have two impacts and makes this equation equal if the equation does not equate that indicates some wrong accounting is done.

In present Case, Accounting equation will be like

Assets decrease that is Cash is reduced when expenses for utility paid

Next Impact will on owners equity also reduce

Then the Accounting equation be will be equated.

In case this utilities bill not paid immediately then this will result in an increase in liabilities and reduce the owner equity which again makes the equation equal which is required as per the double-entry system.

Note :

Another example where assets increase and equity owner also will be

1. sale of service say 1000$ the cash or bank will increase under the heading of Assets and the next impact will be on owner equity which will also increase. There will be no roll of the creditor in this