A Debit to Sales Returns and Allowances and a Credit

question 45

Multiple Choice

A debit to Sales Returns and Allowances and a credit to Accounts Receivable:

• A) Reflects an increase in amount due from a customer.
• B) Is recorded when a customer takes a discount.
• C) Records the cost side of a sales return.
• D) Reflects a decrease in amount due to a supplier.
• E) Recognizes that a customer returned merchandise and/or received an allowance.

---

Definitions:

Direct Labor-hours

The complete total of working hours by individuals directly involved in the fabrication process.

Fixed Overhead

Costs that do not vary with the level of production or sales, including rent, salaries, and insurance, which are incurred regardless of the business activity level.

Work In Process

Goods that are in various stages of the production process but are not yet completed products.

Predetermined Overhead Rate

An estimated rate used to allocate manufacturing overhead to individual products or job orders based on a specific activity base.