Question

In: Accounting

1. Which of the following is not considered a product cost? a. selling expense b. indirect...

1. Which of the following is not considered a product cost?

a. selling expense

b. indirect materials

c. direct materials

d. direct labor

2. Variable costs are expenses that _________________________.

a. remain constant on a per-unit basis and remain constant in total regardless of activity level

b. remain constant on a per-unit basis but change in total based on activity level

c. remain constant in total regardless of the activity level within a relevant range

d. decrease in a per-unit basis as activity level increases

3. Which of the following would not be classified as manufacturing overhead?

a. property taxes on the factory

b. indirect labor

c. indirect materials

d. direct labor

Expert Solution

1. a)Selling expense

Selling expense is not part of product cost. Product cost consists of direct material, Direct Labour, Variable and Fixed manufacturing overheads. Only Indirect materials direct, materials and direct labor is part of product cost. Selling expense is charged to Income statement. Closing stock is valued is product cost

2. b)Remain constant on a per unit basis but change in total based on activity level

Variable costs are the costs which are variable in nature at per unit level. They change in total when multiplied with total activity. At overall level they do not remain fixed like fixed cost. Hence answer is Option b). Only fixed cost decreases per unit level as activity level increases. Also only fixed costs remains constant at overall level regardless of activity level within a relevant range

3. d)Direct Labor

Direct labor is part of prime cost and not part of manufacturing overhead. Manufacturing overheads are the overheads which are incurred to facilitate the production. Hence all the other 3 items are part of manufacturing cost. Hence answer is Option D)

ekkarill92 answered 2 years ago

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