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Free response · 3.4 Business Expenses
Exam-style concept-application task: apply the topic to a new business scenario. Suggested time 12–13 minutes.
FRQ 3 — Concept application (3 points)
Maya is launching Pedal & Pour, a mobile bicycle-repair service that travels to customers. Her startup list: $900 to register the LLC and obtain a city permit; $7,500 for a cargo van conversion and tool set; $1,200 for a website and launch advertising; $600 for the first six months of liability insurance; $1,400 for an initial stock of tubes, chains, and brake pads. Once open, each repair uses about $18 of parts and takes an hour of her time; she also expects $140 a month for the van's insurance and $85 for a booking app.
(A) Classify each of Maya's five startup items as a one-time expenditure or an initial expense that becomes ongoing, and compute the total startup cost. 1 pt
(B) Using the framework's terms for a service business, identify Maya's direct costs and explain how they differ from her operating expenses. 1 pt
(C) Maya is deciding whether to add $45 a month of tool-theft insurance. Explain the trade-off she faces, referring to the framework. 1 pt