In 2020, the Allen Company Had Consulting Revenues of $1,000,000

question 71

Multiple Choice

In 2020, the Allen Company had consulting revenues of $1,000,000, while operating costs were $750,000. In 2021, Allen will be introducing a new service that will generate $150,000 in sales revenues and $60,000 in operating costs.
-Assuming no changes are expected for the other services, the differential operating costs for 2021 will be:

• A) $250,000.
• B) $150,000.
• C) $90,000.
• D) $60,000.

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Definitions:

Job-Order Costing System

Job-Order Costing System is an accounting method used to assign manufacturing costs to an individual product or batch of products, making it possible to track the cost associated with specific jobs or orders.

Overapplied

A situation where the allocated manufacturing overhead costs exceed the actual overhead costs incurred.

Underapplied

A situation in accounting where the allocated costs are less than the actual costs incurred.

Cost of Goods Sold

The immediate expenses related to manufacturing the products a company sells, comprising costs for materials and labor.