Question

Sales commission is a part of the following cost classifcations:

A. product, direct labor, prime, conversion

B. period, conversion

C. Period only

D. Product, direct materials, prime

Answer 1

Option C. Period only

Sales commission is a period cost.

Reason:

Expenses incurred which are not part of production cost or manufacturing cost are referred as period cost.

Production cost or manufacturing cost invoves followings:

1. Direct Material Cost

2. Direct labor cost ( Direct wages to workers)

2. Manufacturing overhead cost ( like Depreciation of Plant, Factory electricity expenses)

Other than above cost like Selling expenses cost like Sales commission, Sales salary expenses etc are part of period cost.

Thus, Sales commission is part of period cost.

Note:

Conversion cost is cost which incurred while transforming raw materials to finished goods. Conversion cost includes Direct labor cost and Manufacturing overhead cost.