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Homework answers / question archive / Review the classification scenario's below and comment on whether it is possible for a cost to exist that would be identified in the scenario
Review the classification scenario's below and comment on whether it is possible for a cost to exist that would be identified in the scenario. Explain your answer as to why the classification is plausible or not.
1. A cost that is a Direct Cost and Factory Overhead
2. A Direct Labor cost that is also classified as a Converting cost
3. A Prime cost that is Indirect
4. A Direct Material cost that is a Period cost
5. A Product cost that is Administrative
1. No, this classifaction is not plausible
Because Direct cost are varies with the production, they are direct product cost while factory overhead costs contains all product costs but they are not directly related to the production so they are all indirect product costs , so classification is not plausible.
2.Yes , this classification is plausible
Beacuse conversion costs are those production costs , which converts raw materials in to completed product and one of the example of conversion cost is direct labor cost. so this classification is plausible.
3. No, this classifaction is not plausible
Because Prime cost is the total of all direct costs of production, so a Prime cost can not be a indirect cost.
4. No, this classifaction is not plausible
Because Direct material cost is a direct product cost as it varies with the production and period costs are those costs which are not related to production so this classification is not plausible.
5. No, this classifaction is not plausible
As period costs can be classified as administrative and not product costs , all product costs are considered as manufacturing costs.
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