In December, 2018, Shooger Candy Company Began Including One Coupon

question 77

Multiple Choice

In December, 2018, Shooger Candy Company began including one coupon in each package of candy and offered customers a Stuffed Shooger Bear in exchange for $5 and five coupons. The stuffed bears cost Shooger $5.10 each. Eventually, it is expected that 30% of the coupons will be redeemed. During December, Shooger sold 230,000 packages of candy and no coupons were redeemed. In its December 31, 2018 balance sheet, what amount should Shooger report as estimated liability for the coupons?

• A) $69,000
• B) $70,380
• C) $13,800
• D) $1,380

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Definitions:

Markup

The sum added onto the purchase price of merchandise to cover both overhead expenses and profit, ultimately setting the retail price.

Predetermined Overhead Rate

A calculated rate used to assign overhead costs to products or services, based on estimated costs and activity levels.

Machine-Hours

The total time that machines are running in a production process, often used as a basis for allocating manufacturing overhead costs.

Job-Order Costing System

An accounting method that tracks costs individually for each job, suitable for companies producing unique or custom products.