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Which of the following best describes a period cost?
A) A cost that relates to a time period which is deducted as expenses for the period and is not included in the inventory valuation.
B) A cost that can be easily allocated to a particular period, without the need for arbitrary apportionment between periods.
C) A cost that is identified with a unit produced during the period, and is included in the value of inventory. The cost is treated as an expense for the period when the inventory is actually sold.
D) A cost that is incurred regularly every period, eg every month or quarter.Sir, what makes A) correct? I thought a period cost would be included in the inventory valuation, just as in the management accountant’s profit statement using the absorption costing. Does the answer mean that the period cost will be deducted as expenses for the period it’s incurred in the financial accountant’s Income statement?
This que don’t relate to period cost
Last month an organization direct woker were paid $40000 for normal working hours .in addition they were paid a total of $12000 for overtime working .Overtime hours which were required due to general shortage of labour were paid time and a half?
What was a direct lab cost for last month?MelodyC:
Although the wordings are all a bit confusing, A is related to marginal costing where the expense for a period is all charges as an expense in that period. (Unlike with absorption costing where part of the expense is included in the valuation of inventory resulting in only part of the expense being charged in the period).
m.adbullah:
In future you must start a new thread when you are asking about a different topic.
Why are you attempting a question for which you do not have an answer? You should be using a Revision Kit from one of the ACCA Approved Publishers – it has answers and explanations!!
The direct cost is the amount paid at the normal rate of pay (not including any overtime premium which is an indirect cost). Given that $12,000 was paid for overtime but was paid at time and a half, 1/3 x 12,000 = $4,000 is the overtime premium and only $8,000 is the pay at the normal rate of pay. So the direct cost is $40,000 + $8,000 = $48,000.
Have you watched my free lectures where this is explained? The lectures are a complete free course for Paper MA and cover everything needed to be able to pass the exam well.
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