Makwa Industries has developed two new products but has only enough plant capacity to introduce one product during the current year.The following data will assist management in deciding which product should be selected.Makwa's fixed overhead includes rent and utilities,equipment depreciation,and supervisory salaries.Selling and administrative expenses are not allocated to individual products. The advertising costs for the product selected by Makwa will be
A)Prime costs.
B)Conversion costs.
C)Period costs.
D)Opportunity costs.

Question

Makwa Industries has developed two new products but has only enough plant capacity to introduce one product during the current year.The following data will assist management in deciding which product should be selected.Makwa's fixed overhead includes rent and utilities,equipment depreciation,and supervisory salaries.Selling and administrative expenses are not allocated to individual products.  The advertising costs for the product selected by Makwa will be
A)Prime costs. 
B)Conversion costs. 
C)Period costs. 
D)Opportunity costs.

Quizplus · Accepted Answer

Advertising costs are considered period costs because they are expensed immediately and do not contribute to the production or conversion of the product. Opportunity costs refer to the cost of forgoing the next best alternative, and are not relevant to this scenario as only one product can be selected. Prime costs refer to direct materials and direct labor, while conversion costs include direct labor and manufacturing overhead.

Makwa Industries Has Developed Two New Products but Has Only