Question: 1. If a company has two operating (selling) departments (shoes and hats) and two service departments (payroll and advertising), which of the following statements is correct?
(a) Wages incurred in the payroll department are direct expenses of the shoe department,
(b) Wages incurred in the payroll department are indirect expenses of the operating departments, or
(c) Advertising department expenses are allocated to the other three departments.
2. Explain the difference between a cost center and a profit center. Cite an example of each.