When Job Order Costing Is Used in a Service Business

question 103

True/False

When job order costing is used in a service business, the allocation of direct labor costs is normally based on direct labor hours, and the allocation of indirect costs is normally based on the indirect labor hours.

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Definitions:

Depreciable Assets

Assets subject to depreciation, reflecting the reduction in value due to wear and tear, decay, or decline in usefulness over time.

Cash Flow

The net amount of cash being transferred into and out of a business, which is used to maintain the company's operations.

Operating Activities

Business actions directly related to its day-to-day operations, such as selling products or services, which generate revenue and expenses.

Amortization Expense

The systematic allocation of the cost of an intangible asset over its useful life.