A New Employee in the Accounting Department Is Having Difficulty

question 187

Essay

A new employee in the accounting department is having difficulty understanding two sets of accounting terms-variable and fixed costs as opposed to period and product costs.He understands that variable costs change during an accounting period while fixed costs do not.However, he explains that a period cost implies that it is for a period of time and is, therefore, also fixed.Does his assumption imply that all product costs are then variable?
Required:
As part of your responsibility to train new staff, explain the difference between these terms.

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Definitions:

Paid-In Capital

Funds raised by a company from investors through the issuance of stock, excluding any amounts derived from retained earnings.

Fair Market Value

The price that property would sell for on the open market between a willing buyer and a willing seller.

Stockholders' Equity

Represents the equity stake currently held on a company's balance sheet by its shareholders, often calculated as total assets minus total liabilities.

Paid-In Capital

refers to the funds received from shareholders in exchange for shares of stock, representing investment directly into the company.