Question

1. Name a characteristic (from an accounting standpoint) that distinguishes product costs from period costs.

2. Name three specific Product costs and which of the three classifications (DM, DL, or MOH) in which each belongs, as an example Factory Equipment Depreciation is a product cost and it is classified as Manufacturing Overhead.

3. The author discusses three methods of separating a Mixed Cost into its Fixed and Variable components. What are the three methods?

4. In the Cost Equation - Y=a+b(x) - what does "a" represent? What does "b" represent?

Answer 1

Answer for 1)

Product Costs are costs which are total of direct material,direct labour and manufacturing overhead which are used to make the product where as period costs does not necessarily form part of product manufacturing process.

Answer for 2)

The chipsets in manufacturing of computer will be direct material product costs.Labour required in assembling section in computer manufacturing factory can be classified direct Labour product costs. Factory rent is manufacturing overhead.

Answer for 3)

1)High low method.

2)scattered graph method.

3)Least square method.

Answer for 4)

Here a represents fixed costs components and it is intercept.b is the slope re-presents the variable costs.