Redrock LLC uses variable costing and absorption costing. In the variable cost income statement, which of...
Redrock LLC uses variable costing and absorption costing. In the variable cost income statement, which of the following is a period cost?
Select one:
a. Direct materials
b. Direct labor
c. Fixed Manufacturing Overhead
d. None of the above
Homework Answers
Answer: C. Fixed Manufacturing Overhead.
Explanation:
Period cost: A period cost is any cost that cannot be capitalized. It is not increase or decrease by changing in level of production at to the some limit.
Direct material and Direct labor is a product costs they added to the cost of the units/products produced. Under variable costing, unit cost = Direct material + Direct labor + Variable manufacturing overhead.
fixed manufacturing overhead is the period cost and the entire amount of these expenses will be reported on the income statement.
Hence, option c. Fixed Manufacturing Overhead is the correct answer.
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