Question

05. Batch. Shu Corporation recently computed total product costs of $567,000 and total period costs of $420,000, excluding $35,000 of sales commissions that were overlooked by the company's administrative assistant. On the basis of this information, Shu's income statement should reveal operating expenses of: 01. O $602,000. 02. 0 $420,000. 03. O $455,000. 04. O $567,000. 05. O $35,000.

Answer 1

Solution:

Question 1: Shu's income statement should reveal operating expenses of:

Answer: Option 03: $455,000

Explanation: All period costs are operating expenses. Sales commissions will also be included in operating expenses. Thus, total operating expenses of $455,000 ($420,000 + $35,000) should be reflected in income statement. Product Costs are not included under operating expenses in income statement. Thus, the correct answer is option 03. i.e. $455,000.

Question 2: Which of the following employees would not be classified as indirect labor?

Answer: Option 03: Salesperson

Explanation: Indirect labor supports the production process. Though they are not directly involved in the active conversion of materials into finished product but they assist the production process. Salesperson would not be classified as indirect labor since salesperson in not related to any production process. Rest all other employees mentioned in the question are indirect labor since they are indirectly related to any production activity. Thus, the correct answer is option 03 i.e. Salesperson would not be classified as indirect labor.