Question

Fresh Wreath Corporation manufactures wreaths according to customer specifications and ships them to customers using United Parcel Service (UPS).
Which two terms below describe the cost of shipping these wreaths?

A. variable cost and product cost
B. variable cost and period cost
C. fixed cost and product cost
D. fixed cost and period cost

Answer 1

Answer:

B. variable cost and period cost

Explanation:

The cost of shipping describes the variable cost and the period cost.

The variable cost is that cost which changes when the level of production changes. This requires indirect resources, indirect labor, and supplies from factories.

The period cost is that cost which is not capitalized plus it would be incurred with the passage of time. It involves the selling and administrative department of the income statement.

Hence, the correct option is B.