11 of 550 completeThis Test 150 pts possible This Question 2

11 of 55(0 complete)This Test: 150 pts possible This Question: 2 pts Which of the following correctly describes the accounting for indirect labor costs? O A. Indirect labor costs are period costs and are expensed when the manufactured product is sold. O B. Indirect labor costs are product costs and are expensed as incurred. O C. Indirect labor costs are period costs and are expensed as incurred. 0 D. Indirect labor costs are product costs and are expensed when the manufactured product is sold.

Solution

Correct Answer (B) Indirect Labor costs are Product costs and are expensed when the manufactured Product is sold.

Explanation

Indirect labor cost is not a period Cost and is taken as an Overhead expense which is added with other Direct Costs to get Cost of Goods Manufactured. Cost of goods manufactured is adjusted with Opening and closing finished inventory to get Cost of Goods Sold which is charged in Income Statement. Indirect labor includes supervisor, Factory cleaner, Plant manager etc.