Costs that are incurred in generating revenues during the period, but are not involved in the manufacturing process, are referred to as
A) period costs
B) conversion costs
C) factory overhead costs
D) product costs

Question

Quizplus · Accepted Answer

Period costs are incurred in generating revenues during the period, but are not involved in the manufacturing process. Examples of period costs include selling and administrative expenses, such as salaries of sales personnel, rent, utilities, and advertising expenses. Therefore, option A is the correct answer. Choice B, conversion costs, refer to the direct labor and overhead costs involved in converting raw materials into finished goods. Choice C, factory overhead costs, are indirect manufacturing costs such as rent, utilities, and insurance on the factory building and equipment. Choice D, product costs, include all direct and indirect costs associated with the manufacture of a product, including direct materials, direct labor, and factory overhead.

Costs That Are Incurred in Generating Revenues During the Period