A classification of costs that determines whether a cost is expensed to the income statement or capitalized to inventory is:Multiple ChoiceDirect labor versus indirect labor.Financial versus managerial.Service versus manufacturing.Direct materials versus indirect materials.Product versus period.
Question
A classification of costs that determines whether a cost is expensed to the income statement or capitalized to inventory is:Multiple ChoiceDirect labor versus indirect labor.Financial versus managerial.Service versus manufacturing.Direct materials versus indirect materials.Product versus period.
Solution
The correct answer is "Product versus period." This classification determines whether a cost is expensed in the income statement (period cost) or capitalized in the inventory (product cost). Product costs are those directly tied to the production of a product (like direct labor, direct materials, and manufacturing overhead), and they are capitalized as part of inventory until the product is sold. On the other hand, period costs are not directly tied to the production of a product (like selling, general, and administrative expenses), and they are expensed in the income statement in the period they are incurred.
Similar Questions
Costs that are capitalized as inventory during completion of products are called:Multiple ChoiceProduct costs.Selling expenses.Period costs.Administrative costs.General costs.
Selection of an inventory costing method by management does not usually depend on: Group of answer choices the financial year end. income statement effects. statement of financial position effects. tax effects.
Define Cost accounting.
Since manufacturing costs (direct materials, direct labor, and overhead) are incurred in the process of manufacturing units of product, these costs are recorded in entries that include debits to:Multiple ChoiceThe Direct Materials Inventory, Direct Labor, and Manufacturing Overhead accounts.Expense accounts.The Work in Process Inventory account.
Cost classification is the process of categorizing costs based on:a.Time periodsb.Payment methodsc.Cost behaviord.All of the above
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