The Proper Accounting for the Costs Incurred in Creating Computer

question 22

Multiple Choice

The proper accounting for the costs incurred in creating computer software products that are to be sold, leased, or otherwise marketed to external parties, is to

• A)capitalize all costs until the software is sold to external parties.
• B)charge research and development expense when incurred until technological feasibility has been established for the product.
• C)charge research and development expense only if the computer software has alternative future uses.
• D)capitalize all costs as incurred until a detailed program design or working model is

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Definitions:

Direct Labor Cost

The cost associated with the labor of employees directly involved in the production of goods or services.

Direct Labor-Hours

A measure of the time spent by workers directly creating a product, which is used to allocate labor costs properly.

Activity Cost Pools

Activity cost pools are groupings of individual costs, classified based on the activities that incur costs within an activity-based costing system to facilitate more accurate product costing.

Time-Driven Activity-Based Costing

This approach to costing allocates business resource costs to products or services, based on the amount of time activities take to perform.