A Lockbox System

question 130

Multiple Choice

A lockbox system:

• A) Entails the use of a single bank which is centrally located to collect payments from geographically diverse customers.
• B) Deposits customer cheques prior to recording customer payments to their respective receivable accounts.
• C) Is used to reduce the disbursement float of a firm.
• D) Is efficient regardless of the locations selected for lockbox destinations.
• E) Entails the posting of customer payments to their receivables account followed by a deposit of the funds received.

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Definitions:

Departmental Overhead Rate

A rate used to allocate indirect costs to products or services, calculated separately for each department within an organization.

Mixing Department

A section within a manufacturing facility where raw materials are combined or processed together to create a product or a component of a product.

Machine Hours

A measure of production time, calculated by the number of hours a machine is operated in the production of goods.

Activity-Based Costing

A pricing approach that allocates overhead and indirect expenses to distinct activities, resulting in more precise product cost calculations.