Which of the Following Statements Concerning Product and Period Costs

question 35

Multiple Choice

Which of the following statements concerning product and period costs is incorrect?

• A) Service businesses have both period and product costs.
• B) Period costs are not directly required to produce the product.
• C) Product costs are included in the cost of inventories until the products are sold.
• D) The basis of the distinction between product and period costs is the timing of the recognition of an expense in the income statement.

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Definitions:

Quantity Sold

The total number of units of a product or service that have been sold in a specific period.

Demand Curve

A graph showing the relationship between the price of a good and the quantity of the good that consumers are willing to purchase.

Constant Marginal Cost

Describes a situation in production where the cost of producing an additional unit of output is the same, regardless of the level of production.

Profit-Maximizing

A strategy or point where a firm achieves the highest possible profit based on its production and selling activities.