Question 1

Period costs are consumed entirely in the current reporting period.

Accepted Answer

Period costs, such as advertising expenses and administrative expenses, are expensed in the current period and cannot be capitalized as a part of the cost of goods sold or inventory. They are not carried forward to future periods.

Question 2

Direct labor is a fixed cost because it always occurs.

Accepted Answer

Direct labor is a variable cost because it varies with the level of production. As production increases, the amount of direct labor required increases and vice versa.

Question 3

Period costs are not considered when costing products for inventory.

Accepted Answer

Period costs are not associated with the production of inventory and are expensed in the period incurred, rather than being included in the cost of goods sold or inventory cost. Only product costs, which include direct materials, direct labor, and manufacturing overhead, are included in the cost of goods sold and inventory cost.

Question 4

The two primary types of cost behavior are fixed and variable.

Accepted Answer

Fixed and variable costs are indeed the two primary types of cost behavior. Fixed costs remain constant regardless of the level of output, while variable costs increase or decrease in proportion to the level of activity.

Question 5

The two types of cost behavior are value-adding and nonvalue-adding.

Accepted Answer

The two types of cost behavior are variable and fixed cost. Value-adding and nonvalue-adding refer to activities or processes within a company and their contribution to the final product or service.

Question 6

Manufacturing costs behave as variable or fixed costs.

Accepted Answer

Manufacturing costs can include both variable costs (such as costs of raw materials and labor that vary with production levels) and fixed costs (such as machinery and rent expenses that remain constant regardless of production levels). Therefore, manufacturing costs can behave as both variable and fixed costs.

Question 7

Variable costs per unit change in an inversely proportional rate to changes in volume.

Accepted Answer

Variable costs per unit remain constant regardless of changes in volume; it's the total variable costs that change in direct proportion to changes in volume.

Question 8

Product costs could be reported as assets.

Accepted Answer

Product costs are the costs incurred in the process of acquiring or making a product, and are reported as assets in the balance sheet until the product is sold. Once the product is sold, the cost of the product is transferred from the balance sheet to the income statement as cost of goods sold.

Question 9

Equipment depreciation is an example of a direct product cost in a manufacturing company.

Accepted Answer

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Question 10

For a manufactured product,all costs incurred to get the product ready for sale are included in the inventory value of the product.

Accepted Answer

This statement is true. The cost of production, including the costs of labor, raw materials, and overhead, are all included in the inventory value of the product. This is because these costs are necessary to get the product ready for sale, and are only expensed when the product is actually sold.

Question 11

Both product costs and period costs could appear on the income statement.

Accepted Answer

Both product costs (such as direct materials, direct labor, and manufacturing overhead) and period costs (such as selling expenses and administrative expenses) can be included in the cost of goods sold or operating expenses sections of the income statement.

Question 12

Inventoriable cost is a synonym of period cost.

Accepted Answer

Inventoriable cost and period cost are two distinct concepts in accounting. Inventoriable cost refers to the cost of goods that a company purchases or manufactures and intends to sell at a profit. These costs are recorded in the inventory account on the balance sheet and are only expensed when the goods are sold. Period costs, on the other hand, are immediately expensed in the period in which they are incurred and are not related to the production or sale of goods. Examples of period costs include administrative expenses, selling expenses, and interest charges.

Question 13

Indirect costs can be conveniently traced to a cost object.

Accepted Answer

Indirect costs cannot be conveniently traced to a cost object and require allocation or estimation methods to be assigned to cost objects.

Question 14

Some period costs can be found in inventory accounts on the balance sheet.

Accepted Answer

Period costs are expenses that are not related to the production of goods or services and are expensed in the period incurred. These costs do not belong in inventory accounts on the balance sheet, which only includes costs directly related to the production process.

Question 15

Period costs flow through three types of inventory accounts before becoming part of the cost of goods sold amount.

Accepted Answer

Period costs are not part of inventory and are expensed immediately, they do not flow through inventory accounts.

Question 16

Fixed costs per unit are constant along a defined range of activity.

Accepted Answer

The answer of Fixed costs per unit are constant along...

Question 17

Period cost and product cost are synonymous terms.

Accepted Answer

Period cost and product cost are not synonymous terms. Product cost includes the costs associated with producing a product (such as direct materials, direct labor, and manufacturing overhead) while period cost includes expenses that are not directly related to the production of a product (such as selling, general, and administrative expenses).

Question 18

Product costs for a manufacturing company consist of direct materials,direct labor,and overhead.

Accepted Answer

Product costs for a manufacturing company consist of direct materials, direct labor, and overhead.

Question 19

Product costs could be found on both the balance sheet and the income statement.

Accepted Answer

Product costs are typically recorded on the income statement under the cost of goods sold (COGS) and on the balance sheet as inventory.

Question 20

The costs of marketing and delivering a product are not included in its inventory valuation.

Accepted Answer

The costs of marketing and delivering a product are considered as operating expenses and are not included in its inventory valuation. Inventory is valued at its cost of production, purchase, or conversion and includes direct costs such as labor and materials, indirect costs such as overheads, and any costs required to bring the inventory to its present location and condition.

Quiz 16: Cost Concepts and Cost Allocation