The Tse Manufacturing Company uses a job-order costing system and applies overhead to jobs using a predetermined overhead rate. The company closes out any balance in the Manufacturing Overhead account to Cost of Goods Sold. During the year the company's Finished Goods inventory account was debited for $125,000 and credited for $110,000. The ending balance in the Finished Goods inventory account was $28,000. At the end of the year, manufacturing overhead was overapplied by $4,500.
-Which of the following cost elements is generally absent in professional service organizations such as public accounting firms?

Question

Quizplus · Accepted Answer

Raw material is generally absent in professional service organizations such as public accounting firms as they do not produce tangible products. Direct labor and indirect labor are both present in professional service organizations as they employ individuals to perform services for clients. Overhead may also be present, but it may be different than in a manufacturing company as professional service firms may have different types of overhead costs, such as rent for office space or software licenses.

The Tse Manufacturing Company Uses a Job-Order Costing System and Applies