What is the rationale behind treating period costs as current expenses? a. Period costs are uncontrollable b. Period costs are immaterial c. Allocation of period costs is arbitrary at best and could lead to erroneous decisions d. Period costs will occur whether or not production occurs and so it is improper to allocate these costs to production and defer a current cost of doing business

What is the rationale behind treating period costs as current expenses? a. Period costs are uncontrollable b. Period costs are immaterial c. Allocation of period costs is arbitrary at best and could lead to erroneous decisions d. Period costs will occur whether or not production occurs and so it is improper to allocate these costs to production and defer a current cost of doing business

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter10: Short-term Decision Making

Section: Chapter Questions

Problem 2MC: Which type of incurred costs are not relevant in decision-making (i.e., they have no bearing on...

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Which of the following statements regarding traditional accounting is true? a. Traditional accounting does not provide managers in a JIT setting with timely information. b. The financial orientation allows for effective measuring disparate items. c. Overhead allocations may lead to cost distortions. d. All of the above are true statements. e. A and C are true, but B is not true.
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A basic tenet of variable costing is that period costs should be currently expensed. What is the rationale behind this procedure? Period costs are generally immaterial in amount and the cost of assigning the amounts to specific products would outweigh the benefits. Allocation of period costs is arbitrary at best and could lead to erroneous decision by management. Period costs are uncontrollable and should not be charged to a specific product. Because period costs will occur whether production occurs, it is improper to allocate these costs to production and defer a current cost of doing business.
Indirect cost is the cost that cannot be directly attributed to the production as these costs are incurred in general and can be fixed or variable in future. True or false
Why is variable costing not in compliance with generally accepted accounting principles?a. Fixed manufacturing costs are assumed to be period costs.b. Variable costing procedures are not well known in industry.c. Net earnings are always overstated when using variable costing.d. Variable costing ignores the concept of lower of cost or market when valuing inventory.
A cost that cannot be changed because it arises from a past decision and is irrelevant to future decisions is a. An uncontrollable cost. d. An opportunity cost. b. An out-of-pocket cost. e. An incremental cost. c. A sunk cost.
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A basic belief of variable costing is that period costs should be currently expensed. What is thebasic rationale behind this procedure?a. Period costs are uncontrollable and should not be charged to a specific product.b. Period costs are generally immaterial in amount and the cost of assigning the amountsto specific products would outweigh the benefits.c. Allocation of period costs is arbitrary at best and could lead in erroneous decisions bymanagement.d. Period costs will occur whether or not production occurs and so it is improper toallocate these costs to production and defer a current cost of doing business.
What is a product cost? What is a period cost? What is the difference and why is it important to separate these costs in financial reporting and decision-making? What is a variable cost? What is a fixed cost? Why is the difference important to making decisions?
A cost that has been incurred in the past, cannot be recouped, and is not relevant to future decisions is termed a a. period cost b. replacement cost c. sunk cost d. differential cost
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