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Q16-5SE-a

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Horngren'S Financial And Managerial Accounting
Found in: Page 886

Short Answer

Identifying product costs and period costs Classify each cost of a paper manufacturer as either a product cost or a period cost:

a. Salaries of scientists studying ways to speed forest growth.

The salaries of scientists will come under the period cost.

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Step by Step Solution

Definition of period cost

The period cost is defined as the operating costs which are expensed in the particular accounting period in which it is incurred.

Identification of cost

The correct option is Period cost.

In this case, the company is paying salaries to the scientists who are studying ways to speed up forest growth. This is not an expense that is related to the production of goods. It is an expense that is recorded when it is incurred

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