Question

1. Which of the following would be classified as direct materials for an auto manufacturer?

a.Material used for door panels

b.Factory light bulbs

c.Steel

d.Drill bits

2. Which of the following is a period cost?

a.Sales commissions

b.Wages of an assembly worker

c.Power

d.Depreciation on factory equipment

3. Which of the following costs appear on a balance sheet?

a.Period Costs

b.Product Costs

c.Opportunity costs

d.Selling expenses

4.

Eliminating a product or segment will usually eliminates all of the product's or segment's variable costs.

True

False

Answer 1

1. The answer is c - Steel

Direct Materials are the cost of the Item that forms an integral part of the product.

So in case of Automobile Company, Steel will be the main component without which Product can't be manufactured.

2. The answer is a- Sales commissions

Sales commissions are not included in the cost of the product and are part of Selling and Administration expenses in the Income Statement and these costs are called as Period Cost.

3. The answer is B - Product Cost

As a part of the Inventory, the Product cost will appear in the Balance sheet.

4. The answer is True.

It is true because by discontinuing any product only variable costs related to product get eliminated but the Fixed Overhead continue to be incurred.

Dear Student,

Best effort has been made to give quality and correct answer. But if you find any issues please comment your concern. I will definitely resolve your query.

Also please give your positive rating.