Is the cost of disposing hazardous waste materials resulting from factory operations a product cost or...

Is the cost of disposing hazardous waste materials resulting from factory operations a product cost or a period cost? Explain your statements/arguments.

Expert Solution

A product cost is a cost which includes variable and fixed manufacturing cost. The factory overheads both variable and fixed are part of the product cost. The cost of disposing of hazardous waste materials if it is budgeted in factory operations and included as part of manufacturing overheads budget is part of the product cost of the firm. A firm can have a regular disposal of hazardous waste material to comply with the environmental laws. Such costs are fixed manufacturing overheads in nature and incurred in factory to comply with laws.

A period cost is a cost which is charged to the income statement during the period in which it is incurred. A period cost is not part of factory overhead budget and is not part of product manufactured. A period cost is not part of inventory cost and expensed when it is incurred. For example: selling, marketing and administrative overheads. Such expenses are non- factory operations related overheads.

ekkarill92 answered 1 year ago

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