Which of the following statements regarding the differences between managerial accounting applications for manufacturing and service...
Which of the following statements regarding the differences between managerial accounting applications for manufacturing and service companies is true?
a.Service companies require a physical production site.
b.Service companies have larger materials, work in process, and finished goods inventories than manufacturing companies.
c.Service companies incur both product costs and period costs.
d.Service companies may use cost of services on the income statement rather than cost of goods sold.
Homework Answers
Answer
- Correct Answer = Option ‘D’ :Service companies may use cost of services on the income statement rather than cost of goods sold.
Service company provides services and merchandise is not bought and sold. Hence, usage of ‘cost of goods sold’ makes no sense.
- Also,
>Service companies do not require production site as no production work is carried out by them.
>They have no material stock, or work in process inventory or finished goods inventory.
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