C & C Power Lines Is a Subcontractor That Works

question 57

Multiple Choice

C & C Power Lines is a subcontractor that works on public utilities.Which of the following is a key characteristic that makes it distinctively a service company?

• A)It does not maintain inventories.
• B)Its products are tangible.
• C)Its product costs appear below the line in computing gross margin.
• D)All of its costs are period costs.

---

Definitions:

Variable Manufacturing Overhead

The portion of manufacturing overhead costs that vary with the level of production, such as utilities and materials.

Direct Labor-Hours

The cumulative hours employees spend directly participating in the manufacturing process.

Variable Manufacturing Overhead

The portion of manufacturing overhead costs that varies directly with production volume, such as utilities or raw materials.

Predetermined Overhead Rate

A rate used to allocate overhead costs to products or job orders, calculated before the period begins based on estimated overhead costs and an allocation base.