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Which costs are classified as period costs in a manufacturing business?
ASelling and administrative expenses
BDirect materials and direct labor
CFactory overhead and direct labor
DDirect materials and factory overhead
Answer & Solution
Correct answer: A. Selling and administrative expenses
1. Period costs are the selling and administrative expenses that have nothing to do with the production process.
2. Selling expenses market products and deliver them to customers, and administrative expenses run support services such as accounting and human resources.
3. Direct materials, direct labor and factory overhead are the three product costs, incurred when goods are manufactured.
4. So selling and administrative expenses are the period costs.
_Source: Jonick, Principles of Managerial Accounting (UNG Press, CC BY-SA 4.0), section 1.2 Cost Terminology and Concepts_
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