Makwa Industries has developed two new products but has only enough plant capacity to introduce one product during the current year.The following data will assist management in deciding which product should be selected.Makwa's fixed overhead includes rent and utilities,equipment depreciation,and supervisory salaries.Selling and administrative expenses are not allocated to individual products. For Makwa's Product L,the costs for direct material,machining labor,and assembly labor represent
A)Conversion costs.
B)Period costs.
C)Prime costs.
D)Common costs.

Question

Makwa Industries has developed two new products but has only enough plant capacity to introduce one product during the current year.The following data will assist management in deciding which product should be selected.Makwa's fixed overhead includes rent and utilities,equipment depreciation,and supervisory salaries.Selling and administrative expenses are not allocated to individual products.  For Makwa's Product L,the costs for direct material,machining labor,and assembly labor represent
A)Conversion costs. 
B)Period costs. 
C)Prime costs. 
D)Common costs.

Quizplus · Accepted Answer

The costs for direct material, machining labor, and assembly labor for Product L represent the prime costs, which are the direct costs of production. This information is relevant in determining the cost of producing and pricing of the product.

Makwa Industries Has Developed Two New Products but Has Only