Share
Explore BrainMass

direct costing, allocation of costs, period cost

1. The term "cost" means:
a. the price paid for a raw material.
b. the wage paid to a worker.
c. the price charged by an entity for its services.
d. all of the above.

2. Direct costing may be used for:
a. internal reporting purposes.
b. external financial reporting purposes.
c. income tax reporting purposes.
d. all of the above.

3. Costs may be allocated to a product or activity for many purposes, but care must be exercised when using allocated costs because:
a. all costs may not have been allocated to the product or activity.
b. direct costs identified with the product or activity may not be accurately assigned.
c. arbitrarily allocated costs may not behave in the way assumed in the allocation method.
d. fixed costs will change in total if the volume of activity changes.

4. Which of the following costs would be classified as a period cost?
a. Indirect labor.
b. Plant electricity.
c. Production line maintenance costs.
d. Advertising expense for the product.

Solution Preview

1. The term "cost" means:
a. the price paid for a raw material.
b. the wage paid to a worker.
c. the price charged by an entity for its services.
d. all of the above.

D. Cost is what you paid for something. It is not always an immediate "expense." Expense is a cost that is used up! So, beware. Not the same!

2. Direct costing may be used for:
a. internal reporting purposes.
b. external financial reporting purposes.
c. income tax reporting ...

Solution Summary

A sentence of two explains why each choice is indicated.

$2.19