Product Costs and Period Costs: Videos & Practice Problems
Product Costs and Period Costs
Product Costs and Period Costs
An accountant tells their colleague that a delivery driver’s salary is a product cost, because customers wouldn’t be able to get the product without the delivery driver. This accountant is:
Correct, all costs associated with getting the product to a customer are product costs.
Correct, all costs that a business pays are indirectly related to producing products, so they are all product costs.
Incorrect, the delivery driver is an indirect cost, so it does not qualify as a product cost.
Incorrect, the delivery driver does not produce or acquire new products for sale, so their salary is a period cost.
Which of the following is a period cost for a firm that produces laptop computers?
RAM memory
Workers who assemble laptops
The accounting department
A repairman at the laptop factory
The Manufacturing Production Process
The Manufacturing Production Process
Which of the following items would be recorded as part of a clock company’s Work in Process Inventory?
A completed grandfather clock
A partially finished alarm clock
A wooden bird for a coocoo clock made by another company
A timing screw for an antique clock
A company files for bankruptcy, and as part of the process they are required to report on the value of unsold products that are completely produced. The company could find this amount as the value of their ________ inventory.
Cost of Goods Sold
Finished Goods
Work in Process
Raw Materials
Manufacturing, Merchandising, and Service Costs
Suppose that a company provides tax preparation to businesses. Which of the following would be a product cost for this business?
The wage of tax preparers
The cost of tax preparation software
The cost of ink used to print forms
None of the above
A firm that buys ice cream from a local dairy and combines it with fresh baked cookies to make ice cream sandwiches is which type of business?
Manufacturing
Merchandising
Service
Hybrid
