Johnson, Inc

question 102

Multiple Choice

Johnson, Inc. has just ended the calendar year making a sale in the amount of $10,000 of merchandise purchased during the year at a total cost of $7,000. Although the firm paid in full for the merchandise during the year, it has yet to collect at year end from the customer. The net profit and cash flow from this sale for the year are

• A) $3,000 and -$7,000 respectively.
• B) $3,000 and $7,000 respectively.
• C) $3,000 and $10,000 respectively.
• D) $7,000 and -$3,000 respectively.

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Definitions:

Period Costs

Expenses that are not directly tied to the production process and are expensed in the period they are incurred.

Indirect Materials

Supplies used in the production process that are not directly traceable to a finished product.

Factory Overhead

Factory overhead refers to the indirect costs associated with manufacturing, excluding direct materials and direct labor.

Assembly Line

A manufacturing process in which parts are added to a product in a sequential manner to create a finished product more efficiently.