Which of the Following Statements Concerning Manufacturing Costs Is Incorrect

question 112

Multiple Choice

Which of the following statements concerning manufacturing costs is incorrect?

• A) All salaries incurred by the sales department are expensed as incurred.
• B) Direct labor costs are recorded initially in an inventory account.
• C) Depreciation on manufacturing equipment is a period cost.
• D) The cost of direct materials can be readily traced to products.

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Definitions:

Contribution Margin

The difference between sales revenue and variable costs of a product or service, used to cover fixed costs and to generate profit.

Fixed Costs

Costs that do not change with the level of production or business activity, such as rent, salaries, and insurance premiums.

Full-Service Contract

An agreement that provides a complete range of services related to a specific product, property, or activity, including maintenance, repairs, and often replacements.

Profit

The financial gain achieved when the revenue from business activities exceeds the expenses, costs, and taxes involved in maintaining the operation.