Question

1. In a contribution format income statement for a merchandising company, the cost of goods sold reports the product costs attached to the merchandise sold during the period. True/ false

2. The salary paid to the president of a company would be classified on the income statement as a(n): manufacturing overhead cost. manufacturing overhead cost, selling expense, direct labor cost , admin expense

3.Differential costs can: only be fixed costs, be sunk costs, only be variable costs, be either fixed or variable

4.

Mark is an engineer who has designed a telecommunications device. He is convinced that there is a big potential market for the device. Accordingly, he has decided to quit his present job and start a company to manufacture and market the device

Rent on the administrative office space is:a product cost, an opportunity cost, variable cost, period cost

5. A variable cost remains constant if expressed on a unit basis. true/ false

Answer 1

1) True: The meaning of term cost of goods states the actual cost of goods sold during the period further the formula of cost of goods sold is "Opening stock + Current year purchase - Closing Stock" Thus this makes it further clear that the answer is correct

2) Admin Expense: The salary paid to president of the company cannot be allocated to single process or goods, the service provided by president is not only limited to manufacturing division and thus allocating the same to manufacturing cost or labor cost or selling cost would lead to inappropriate disclosure.

3) Differential costs can either be fixed costs or variable costs

4) The office is exclusively for the product had the product not being made Mark would not be spending the money

5) True: Variable cost are constant if expressed on per unit basis