Question

1.Period costs are the ________.

A) product costs that must be paid in the accounting period in which they are incurred.

B) operating costs that are expensed in the accounting period in which they are incurred.

C) costs related to production of products.

D) same as manufacturing overhead costs

2.Which of the following represents the combined sum of direct materials costs and direct labor costs?

A) conversion costs

B) period costs

C) prime costs

D) fixed costs

3. Which of the following best describes horizontal analysis?

A) comparing financial statement line items from year to year for the same company

B) expressing each financial statement amount as a percentage of a budgeted amount

C) comparing a company's financial statements with other companies

D) calculating key ratios to evaluate performance

Answer 1

1. B) Operating costs that are expensed in the accounting period in which they are incurred.

2. C) Prime Costs.

Prime Costs = Direct Material Costs + Direct Labour Costs + Direct Expenses

3. A) comparing financial statements line items from year to year for same company.

Horizontal analysis is used in financial statements analysis to compare historical data such as ratios or line items over a number of accounting periods.

Horizontal Analysis is used in review of company's financial statements over multiple periods.