Mark is an engineer who has designed a telecommunications device. He is convinced that there is a big potential market for the device. Accordingly, he has decided to quit his present job and start a company to manufacture and market the device.
-Rent on the administrative office space is:
A) a variable cost
B) an opportunity cost
C) a period cost
D) a product cost

Question

Quizplus · Accepted Answer

Rent on administrative office space is a period cost, which is a cost that is expensed in the period it is incurred and is not directly related to the production of the device. It is necessary for the operation of the business, but it does not vary directly with the production volume or the number of units produced. Opportunity cost is the cost of the next best alternative foregone, and it is not applicable in this scenario. A product cost is a cost that is directly related to the production of the device, such as direct materials and direct labor, and it is not relevant to the rent on the administrative office space in this context.

Mark Is an Engineer Who Has Designed a Telecommunications Device