When Comparing Income Statements, Which Type of Company Does Not

question 74

Multiple Choice

When comparing income statements, which type of company does not have a section for cost of goods or services sold?

• A) Manufacturing firm
• B) Service firm
• C) Merchandising firm
• D) All of these have a cost of goods or services sold section

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Definitions:

Predetermined Overhead Rate

An estimated rate used to allocate manufacturing overhead to individual products or job orders based on a certain activity base, such as machine hours or labor hours.

Machine-Hours

A unit of measure that represents the operational time of a machine, used in allocating manufacturing overhead based on the time machines are run.

Plantwide Predetermined

A rate, often related to overhead costs, that is set before the accounting period begins and applied uniformly throughout an entire plant or organization.

Machine-Hours

A measure of production output or activity level using the total hours machines are operated.