Depreciation on a personal computer used in the marketing department of a manufacturing company would be classified as:
A) a product cost that is fixed with respect to the company's output.
B) a period cost that is fixed with respect to the company's output.
C) a product cost that is variable with respect to the company's output.
D) a period cost that is variable with respect to the company's output.

Question

Quizplus · Accepted Answer

Depreciation on a personal computer used in the marketing department is a period cost that is fixed with respect to the company's output. Product costs are costs that are directly related to the production of goods, while period costs are expenses that are not directly related to the production process but are incurred over a period of time, such as rent, utilities, and depreciation. In this case, the computer is being used for general administrative purposes, which makes it a period cost. Since the computer is not being used to produce goods, it is fixed with respect to the company's output, making option B the correct choice.

Depreciation on a Personal Computer Used in the Marketing Department