Pets 'N Pals Is Attempting to Determine the Cost of Operating

question 7

Multiple Choice

Pets 'n Pals is attempting to determine the cost of operating a particular store.Which of the following costs would be classified as an indirect cost?

• A) Fees paid to external accountant for corporate audit
• B) Cost of operating company-owned vehicles by the store
• C) Salary of store manager
• D) Cost of aquariums used to display exotic fish

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Definitions:

Job-Order Costing System

An accounting system that calculates the cost of individual jobs or batches in manufacturing or service sectors, tracking direct materials, direct labor, and overhead per job.

Predetermined Overhead Rate

An estimated rate used to apply manufacturing overhead to products or job orders, calculated before a period begins based on expected costs and activity levels.

Traditional Costing System

A method of cost accounting that allocates factory overhead to products based on volume-driven measures such as machine hours or labor hours.

Manufacturing Overhead

Consists of all manufacturing costs that are not directly associated with the production of goods, including indirect labor, maintenance, and factory utilities.