Which of the following is a period cost a Wages of an assemb

Which of the following is a period cost?

a. Wages of an assembly worker

b. Depreciation on factory equipment

c. Sales commissions

d. Power

A cost that has been incurred in the past and is irrelevant is termed a(n):

a. variable cost.

b. opportunity cost.

c. sunk cost.

d. differential cost.

Compute factory overhead cost from the following costs:

a. $96,840

b. $78,930

c. $73,000

d. $52,530

Which of the following items would be classified as a part of prime cost?

a. Administrative cost

b. Direct labor cost

c. Factory overhead cost

d. Selling cost

Depreciation on factory buildings	$ 45,950
Depreciation on office equipment	32,980
Direct materials used	96,840
Indirect labor	6,580

Solution

Solution: 1st Answer is C. Sales commissions Working Notes: Sales commission is a period cost , as it is not included in product cost and directly charged to income statement. Wages of an assembly worker , Depreciation on factory equipment & Power are included in product cost , so there are not product cost. 2nd Answer is C. sunk cost. Working Notes: Sunk cost is the cost that has been incurred in past or committed in past , as it will be same for each alternative decision so it is also termed as irrelevant. Hence Sunk cost is a cost that has been incurred in the past and is irrelevant. 3rd Answer is d. $52,530 Working Notes: Factory overhead cost = Depreciation on factory buildings + Indirect labor =$45,950 +$6,580 =$52,530 4th Answer is b. Direct labor cost Working Notes: Prime cost consist of direct labor & direct materials cost. Hence, Direct labor cost would be classified as a part of prime cost. Please feel free to ask if anything about above solution in comment section of the question.