A Company Has Two Distribution Channels: Wholesale and Business Sales

question 128

Multiple Choice

A company has two distribution channels: wholesale and business sales. Which of the following costs would be allocated as distribution-channel-level costs when analyzing the profitability of customer distribution channels?

• A) sales order costs
• B) customer visit costs
• C) salary of the wholesale distribution channel manager
• D) corporate adminstration costs

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Definitions:

Predetermined Overhead Rate

An estimated charge per activity unit used to assign overhead costs to products or services, calculated before the period begins.

Direct Labor-Hours

The sum of hours contributed by workers directly participating in creating goods or offering services.

Overapplied Overhead

A situation where the allocated manufacturing overhead cost is more than the actual overhead cost incurred.

Predetermined Overhead Rate

A rate used to allocate overhead costs to products or services, calculated before the accounting period begins based on estimated costs and activity levels.