A company which manufactures custom-made machinery routinely incurs sizable telephone costs in the process of taking sales orders from customers. Which of the following is a proper classification of this cost?
A) Product cost
B) Period cost
C) Conversion cost
D) Prime cost

Question

Quizplus · Accepted Answer

Telephone costs incurred in taking sales orders are considered period costs because they are not directly tied to the production process and are expensed in the period they are incurred.

A Company Which Manufactures Custom-Made Machinery Routinely Incurs Sizable Telephone