Skip to content

CA Intermediate · Cost and Management Accounting · Introduction to Cost and Management Accounting

Which of the following is a cost that is classified as a 'period cost' rather than a 'product cost' under the traditional approach followed in cost accounting?

The sales manager's salary is a period cost. Period costs are linked to time and not to production, so selling and distribution expenses are charged to the period. Operators' wages, factory depreciation and raw materials consumed are all attached to units produced and are therefore product costs.

  1. AWages paid to machine operators on the shop floor
  2. BDepreciation on the factory building
  3. CSalary of the sales manager of a manufacturing firmCorrect
  4. DCost of raw materials consumed in production

Explanation

Product costs are costs attached to units produced: direct materials, direct labour and factory overheads. Selling and distribution costs such as a sales manager's salary are charged to the period in which they are incurred. Factory building depreciation is a production overhead, so it is a product cost.

Did you get it right without looking?

One question tells you little. A timed set on Introduction to Cost and Management Accounting shows your real accuracy, how long you take and where you lose marks.

Practise Introduction to Cost and Management AccountingFree diagnostic mock

More Introduction to Cost and Management Accounting questions