Chapter 6 Questions (pages 260) 6-2: Are selling and administrative expenses tre
ID: 2453434 • Letter: C
Question
Chapter 6 Questions (pages 260) 6-2: Are selling and administrative expenses treated as product costs or as period costs under variable costing? (Provide an answer for both variable and fixed selling and administrative expenses and include an example of each) and administrative expenses and include an example of each). another period under absorption costing. 6-11 : What is a segment of an organization? Give two examples. 6-3: Explain how fixed manufacturing overhead costs are shifted from one period to 63: Explain how fixed manufacturing overhead costs are shifted from one period to · ·Explanation / Answer
6-2.
Product cost: The costs that are incurred for manufacturing a product are known as product cost. Examples are direct material cost, direct labor cost, and manufacturing cost.
Period cost: The costs that are not arising for manufacturing a product but arising within a particular period are known as period cost. Examples are marketing and selling expenses, interest expense, and administrative expenses.
Answer: Based on the above definitions and examples, selling and administrative expenses are period costs.
Answer: Sales commission is a fixed selling expense, since commission is paid as a percentage on sale value. Selling expenses, salaries for salesman are not depending upon the value of sales. Therefore, these are fixed selling expenses.
Office supplies are variable administrative expenses, because more work in office increases the demand of supplies (means variable). Depreciation of office building is a fixed administrative expense, since it is irrelevant with any other variable.