Question

Which of the following costs at a manufacturing company would be treated as a product cost...

Which of the following costs at a manufacturing company would be treated as a product cost under variable costing?

A) Advertising expense

B)Direct Labor Cost

C)Rent on the factory building

D)Administrative Salary

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Answer #1

Answer)

Product Cost: It is the cost that is incurred to manufacture a product. It includes expeneses directly relatable to manufacture of a product such as Direct Material, Direct Labor, Factory overheads,etc.

The correct answer in the given question is Option (B) Direct Labor cost is a product cost as its is directly related to manufacture of a product.

  • Advertisement expense, Rent of Factory Building and Administitive salary are general expenses and are not directly related to a partcular product. These are examples of  period cost which are allocated over all products
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