Q16-5SE-c
Question
Identifying product costs and period costs Classify each cost of a paper manufacturer as either a product cost or a period cost:
c. Cost of electricity at the paper mill
Step-by-Step Solution
Verified Answer
The cost of electricity at the paper mill will come under the product cost.
1Definition of a manufacturing company
A manufacturing company is defined as a business organization that sells the goods produced by themselves.
2Identification of cost
The correct option is Product cost.
In this case, the company has incurred the cost of electricity for the paper mill. This is considered as the cost which is associated with the manufacturing of the product. So, it will be considered as the product cost for the company.
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