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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Concepts and terminology

From the choices presented in parentheses, choose the appropriate term for completing each of the following sentences:

a. Advertising costs are usually viewed as (period, product) costs.

b. Feedback is often used to (improve, direct) operations.

c. Payments of cash or the commitment to pay cash in the future for the purpose of generating revenues are (costs, expenses).

d. A product, a sales territory, a department, or an activity to which costs are traced is called a (direct cost, cost object).

e. The balance sheet of a manufacturer would include an account for (cost of goods sold, work in process inventory).

f. Factory overhead costs combined with direct labor costs are called (prime, conversion) costs.

g. The implementation of automatic, robotic factory equipment normally (increases, decreases) the direct labor component of product costs.

To determine

Period costs:

Period costs are the costs other than the product costs. These costs are not incurred in manufacturing the goods. These costs include the administrative expenses, and selling expenses.

Cost object:

A cost object is something to which costs are assigned, it is often a product lines or customers department for which costs are accumulated or measured by the management.

Conversion cost:

A conversion cost refers to the cost of converting the raw materials into a finished product. Conversion cost includes direct labor as well as factory overhead costs.

To choose: The appropriate term for completing each of the following sentences.

Explanation

The appropriate term for completing each of the following sentences:

a. Period
b. Improve
c. Costs
d. Cost object
e. Work in process inventory
f. Conversion
g. Decreases

Table (1)

  1. a. Period costs include the administration costs, and the selling costs. As the Advertising costs are the selling costs, they are usually viewed as period costs.
  2. b. By receiving the feedback, the Company can improve on the areas wherever it needs attention. Hence, feedback is often used to improve the operations, and not to direct the operations.
  3. c. No revenues are generated when the cash is paid for expenses, but when costs are paid, the revenues will be generated...

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