COST ACCOUNTING
INTRODUCTION TO COST ACCOUNTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Depreciation on the plant installed in the factory
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The electricity cost of the office of factory foreman
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The cost of shipping finished products to customers
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The cost of fuel used in the factory
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Detailed explanation-1: -The cost of shipping finished products to consumers is not a product cost. A product cost or production cost is a cost that is incurred during the production of a product in a factory. It includes direct costs such as raw materials, indirect costs and labour costs.
Detailed explanation-2: -Period costs are all costs not included in product costs. Period costs are not directly tied to the production process. Overhead or sales, general, and administrative (SG&A) costs are considered period costs.
Detailed explanation-3: -Product costs are costs that are incurred to create a product that is intended for sale to customers. Product costs include direct material (DM), direct labor (DL), and manufacturing overhead (MOH).
Detailed explanation-4: -Examples of product costs are direct materials, direct labor, and allocated factory overhead. Examples of period costs are general and administrative expenses, such as rent, office depreciation, office supplies, and utilities.
Detailed explanation-5: -The correct answer to the given question is option (b) Sales and administrative expenses . The product costs are the costs which are directly related to the process of manufacturing.