You Are the Owner and Operator of a Catering Business

question 156

Essay

You are the owner and operator of a catering business. In addition to catering a wide variety of functions such as business meetings, weddings, birthday parties, etc., you sell decorated cakes in your store. A particular business customer has signed a $12,000 contract with you to provide refreshments for its monthly business meetings with the total contract amount due at the contract signing.
Describe the rules you will follow in booking (i.e., recording) the cake sales revenues and catering contracts such as the one described here.

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Definitions:

Processing Department

A unit or area in a manufacturing facility where raw materials are processed into finished goods.

Equivalent Units

A concept used in cost accounting to convert partial units of production into full units for the purpose of accurately assigning costs.

Conversion Costs

The combined cost of labor and overhead expenses required to transform raw materials into finished goods.

Work in Process

Inventory that is in the production process but is not yet completed.