Isondo's TV and Appliance Store Is a Small Company That

question 124

Multiple Choice

Isondo's TV and Appliance Store is a small company that has hired you to perform some management advisory services. The following information pertains to 2015 operations.
$$\begin{array} { l r } \text { Sales (1,200 televisions) } & \$ 1,200,000 \\\text { Cost of goods sold } & 540,000 \\\text { Store manager's salary per year } & 108,000 \\\text { Operating costs per year } & 216,000 \\\text { Advertising and promotion per year } & 24,000 \\\text { Commissions ( } 3 \% \text { of sales) } & 36,000\end{array}$$
-Which cost estimation method is being used by Isondo's TV and Appliance Store?

• A) the operating costing method
• B) the marginal costing method
• C) the account analysis method
• D) the cost-volume-profit analysis method

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Definitions:

Accumulated Depreciation

The total amount of depreciation expense that has been recorded against a fixed asset since it was acquired, representing the wear and tear over time.

Service Revenue

Income earned by a company for the services it provides to its clients.

Adjusting Entries

Journal entries made at the end of an accounting period to update certain accounts and report revenues and expenses in the appropriate period.

Depreciation Expense

An accounting method that allocates the cost of a tangible asset over its useful life.