Question

Which of the following is NOT a period cost?

Multiple Choice

• Cost of a seminar concerning tax law updates that was attended by the company's controller.

• Insurance on a company showroom where customers can view new products.

• Depreciation of factory maintenance equipment.

• Salary of a clerk who handles customer billing.

For financial reporting purposes, the total amount of product costs incurred to make 5,000 units is closest to:

Multiple Choice

• $ 70,750

• $ 10,000

• $ 65,750

• $ 55,750

Answer 1

Q1:

Answer: Depreciation of factory maintenance equipment

Explanation:

Period costs are associated with the passage of time. Like Rent, salaries, audit fee, etc.

It comprises of non-manufacturing costs. i.e. Office and administration and selling and distribution etc.

In the given question all are period costs except 'Depreciation on equipment'. It's a product cost as it is a manufacturing cost.

Q2:

Answer: $65,750

Explanation:

Variable costs:
Direct materials	5,000	x	$6.20	=	$31,000
Direct labor	5,000	x	$3.70	=	$18,500
Variable manufacturing overhead	5,000	x	$1.25	=	$6,250
Fixed costs:
Fixed manufacturing overhead					$10,000
Total product costs					$65,750