1. Which one of the following costs is classified as a period cost? (CIA adapted

Question

1. Which one of the following costs is classified as a period cost? (CIA adapted)

A. The wages of a worker paid for idle time resulting from a machine breakdown in the molding department.

B. The wages of the workers on the shipping docks who load completed products onto outgoing trucks.

C. The wages paid to workers for reworking defective products that failed the quality inspection upon completion.

D. The payments for employee (fringe) benefits paid on behalf of the workers in the manufacturing plant.

2. Bent Tree incurred the following unit costs during the year: variable manufacturing cost, $27; fixed manufacturing cost, $10; variable marketing and administrative cost, $8; and fixed marketing and administrative cost, $6. During the year, Bent Tree produced 30,000 units and sold 25,000 units of product. The selling price was $67 per unit. What was Bent Tree's total gross margin?

A. 400,000

B. 750,000

C. 1,000,000

D. 800,000

E. None of these.

Explanation / Answer

1 Cost associated with Shipping to Customers is a Selling (Period) Costs. The Answer is A. All other are Product Costs 2 Sales Price 67.00 Less: Variable Costs Manufacturing OH 27.00 Marketing & Admin 8.00 Contribution Margin 32.00 Units Sold 25000 Total Gross Margin 800000 Answer is D

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