I write on my own by my hand!
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The Author of ASAP Business English Hunger Telegram channel:: Freylina Valeriia Latifa Frolova.
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Statement: Billboard advertising space would be period cost, not a product cost.
True.
Explanation:
Advertising centers around period costs since these costs were not included in the good production. Any non-good production costs fall under the period cost terminology. Advertising of a product has nothing to do with producing a product; only producing-related activities are product cost “worthy.” Ergo, there is no need to reformulate the statement.
Statement: Beginning work in process, plus conversion costs, minus ending work in process, equals cost of goods manufactured.
False.
Statement Reformulated: “Beginning work in process, plus total manufacturing costs (direct materials, direct labor, and manufacturing overhead), minus ending work in process, equals cost of goods manufactured.”
Explanation: To correctly calculate the cost of goods manufactured, not only conversion (direct labor plus overhead) costs must be taken into account, but also direct materials.
Statement: Conversion costs are always the same, no matter the level of output.
False.
Reformulated Statement: “Conversion costs vary in practice, as they constitute direct labor and overhead that change with the change of level of production.”
Explanation: Direct labor and overhead cannot remain the same with changes in the level of production. Extra hours must be paid if the production increases, as the reduced hours should “eat” a portion of a pay cheque if the production stagnates. Overhead costs also cannot remain the same; even though these costs incurred are smaller and are not individually traced to the product, they still are considered when the level of output increases or decreases.
Statement: Production costs generally consist of prime costs plus manufacturing overhead.
True.
Explanation: Production costs could contribute to total costs, involving prime costs (direct labor plus direct materials) plus overhead (utilities, supervising, and depreciation). These costs are configured in every basic accounting manoeuvre.
Statement: Product costs attach can also be described as "inventoriable."
True.
Explanation: Product costs can also be referred to as inventoriable; they appear on a balance sheet as an inventory and are expensed as the cost of goods sold. For example, for a manufacturer of toys, direct materials, such as fabric and synthetic insides, are an integral part of inventory, and the costs are closely linked to inventory costs.
Statement: The cost of air filters used in the paint shop of a manufacturing facility is a period cost because they are replaced monthly.
False.
The reformulated statement: “The cost of air filters is considered a product cost because they are directly associated with production, capitalizing as an overhead, no matter the frequency of replacing them.”
Explanation: Air filters in the shop, that is, the product costs, are inseparable from the production process as part of the overhead. Period costs, that is, costs that are not directly traced to the product itself, are expensed differently. For example, other than air filters that are constituted as product costs, machine lubricants, depreciation, utilities (electricity), salaries of maintenance employees are encapsulated as product costs as well (under the overhead section).
Statement: Non-manufacturing costs for selling and general/administrative purposes are not part of factory overhead.
True.
Explanation: Overhead is part of the product costs — non-manufacturing costs are period costs, so I vouch for selling and general/administrative costs not to be product costs, and therefore not an overhead. I trust advertising the product did not produce the product; it only made a stellar appearance in the media industry. Factory overhead manifests indirect labor, indirect materials, depreciation, utilities, and maintenance, in which the selling and administrative costs do not coexist.
Statement: Manufacturers may have three inventory categories: raw materials, finished goods, and cost of goods sold.
False.
The reformulated statement: “Manufacturers have three inventory categories: raw materials, work in process (WIP), and finished goods.”
Explanation: Cost of goods sold is not an inventory category. As such, it is an expense account that advocates selling the inventory. The three inventory categories appearing on a balance sheet are raw materials (are about to be utilized), work in process (goods are in the production process), finished goods (completed goods ready for sale and delivery).
Statement: The cost of carbon fiber incorporated into the frame of a bicycle built by TecTrack Bikes is a product cost.
True.
Explanation: The carbon fiber is a direct material, inasmuch that it is used directly in bicycle production. Product costs navigate all necessary component costs of product manufacturing. It cannot be a period cost because period costs yield costs that are not directly connected to the production process, such as advertising blitz.
Statement: Prime costs include direct labor and manufacturing overhead.
False.
The reformulated statement: “Prime costs involve direct labor and direct materials.”
Explanation: Prime costs embody direct costs on products that can be easily traced to the completed product. These costs capture direct materials (raw materials used for manufacturing) and direct labor (wages for factory workers). Prime costs do not “shape” overhead; instead, overhead is included in conversion costs.
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