Fresh Wreath Corporation manufactures wreaths according to customer specifications and ships them to customers using United Parcel Service (UPS). Which two terms below describe the cost of shipping these wreaths?
A)variable cost and product cost
B)variable cost and period cost
C)fixed cost and product cost
D)fixed cost and period cost

Question

Quizplus · Accepted Answer

The cost of shipping wreaths is a variable cost because it varies with the number of wreaths shipped and a period cost because it is incurred during a specific period of time (e.g. a month or a year). Option A is incorrect because product cost refers to the cost of producing the wreaths, not shipping them. Option C is incorrect because fixed cost refers to costs that do not vary with the level of production or sales, such as rent or equipment lease payments. Option D is incorrect because period cost refers to costs that are not directly related to the production process, such as advertising or administrative expenses.

Fresh Wreath Corporation Manufactures Wreaths According to Customer Specifications and Ships