A Company That Uses the Perpetual Inventory System Sold Goods $$\begin{array} { | c | l | l | } \hline \text { Accounts receivable } & 2500 & \\\hline \text { Cash } & & 2500 \\\hline\end{array}$$

question 64

Multiple Choice

A company that uses the perpetual inventory system sold goods to a customer on account for $2500 The cost of the sales was $1250.Which of the following journal entries correctly records this transaction?

• A) \[\begin{array} { | c | l | l | }
• \hline \text { Accounts receivable } & 2500 & \\
• \hline \text { Cash } & & 2500 \\
• \hline
• \end{array}\]
• B) \[\begin{array} { | c | l | l | }
• \hline \text { Accounts receivable } & 2500 & \\
• \hline \text { Sales revenue } & & 2500 \\
• \hline
• \end{array}\]
• \[\begin{array} { | c | l | l | }
• \hline \text { Costs of sales } & \$ 1250 & \\
• \hline \text { Inventory } & & \$ 1250 \\
• \hline
• \end{array}\]
• C) \[\begin{array} { | c | l | l | }
• \hline \text { Cost of sales } & 2500 & \\
• \hline \text { Sales revenue } & & 2500 \\
• \hline
• \end{array}\]
• D) \[\begin{array} { | c | l | l | }
• \hline \text { Inventory } & 2500 & \\
• \hline \text { Costs of sales } & & 2500 \\
• \hline
• \end{array}\]

---

Definitions:

Variable Overhead Rate

The ratio of variable overhead costs to a related activity driver, often used in cost accounting.

Overhead Efficiency

A measurement of how effectively a company uses its overhead costs in generating revenue.

Fixed Overhead Budget

A plan for the fixed costs involved in operating a business, which do not vary with levels of production or sales.

Standard Machine-Hours

The predetermined amount of time that machines are expected to operate to produce a set quantity of goods.