Question

Which of the following statements regarding the differences between managerial accounting applications for manufacturing and service companies is not true?

a. Overhead is an indirect cost incurred in serving customers in a service company.
b. Labor may be a direct cost to customers for a service firm.
c. Service companies require a physical production site.
d. Service companies may use cost of services on the income statement rather than cost of goods sold.

Answer 1

Answer:

Option C) Service companies require a physical production site is not a true statement.

Explanation:

• Service companies require a physical production site is not a true statement.
• This is because service companies are engaged in providing service to their customers/clients.
• Providing services does not require a physical production site, because no production is generally involved in relation to the rendering of the services.

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