Which of the Following Correctly Describes the Accounting for Administrative

question 137

Multiple Choice

Which of the following correctly describes the accounting for administrative expenses of a manufacturing company?

• A) Administrative expenses are product costs and are expensed as incurred.
• B) Administrative expenses are period costs and are expensed as incurred.
• C) Administrative expenses are product costs and are expensed when the manufactured product is sold.
• D) Administrative expenses are period costs and are expensed when the manufactured product is sold.

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Definitions:

Adverse Selection

A situation where asymmetry of information results in high-risk individuals being more likely to participate in an agreement or market, leading to an inefficient outcome.

Moral Hazard

The situation where one party may take risks because they do not bear the full consequences or financial burden of their actions.

Health Insurance

A type of insurance coverage that pays for medical and surgical expenses incurred by the insured or provides reimbursement for health expenses.

Incentive

A benefit, reward, or cost that motivates individuals or entities to act in a particular way.