CH 2

Question 1

Difference between Product Cost and Period Cost?

Answer 1

Product Costs are costs incurred to manufacture a physical product. All other costs are period costs.

Question 2

Difference between direct cost and indirect cost?

Answer 2

When the cost traceable to a specific cost object (Customers, Employees, Machines, Processes, Product lines, Geographic territories, Departments, etc.) it is a direct cost. Otherwise, it is an indirect cost.

Question 3

Difference between variable and fixed costs?

Answer 3

Variable costs change proportionally with the cost driver. Fixed costs do not change.

Question 4

What makes up Product Costs?

Answer 4

DM, DL, and MOH

Question 5

Is straight line depreciation a product cost (True or False?), variable cost (True or False)?

Answer 5

True, False. It is a fixed cost because the asset is depreciated at a constant rate over expected lifetime.

Question 5

What makes up Period Costs?

Answer 5

General and Administrative Expenses + Selling Expenses

Question 6

Product Costs are expensed in the period incurred or the period where the product is sold? In what line item are they expressed?

Answer 6

Product Costs are expensed in the period the product is sold; COGS

Question 7

What makes up MOH?

Answer 7

Indirect materials + indirect labor