Question

Castillo Corporation, a manufacturer, reports costs for the year as follows: Direct Materials Used $735,000 Wages to Line Workers 510,000 Office Rent 26,000 Indirect Materials Used 700,000How much is the total period costs for Castillo? $735,000 $510,000 $26,000 $700,000

Answer 1

Answer:

The correct answer would be option C, $26000

Explanation:

There are a lot of costs associated with the production, Advertisement, Sales, etc of a product. These costs acts as the overheads for the company. If there is a cost which cannot be capitalized into Inventory, Prepaid expenses, or fixed assets, it is called as the Period Cost. Good examples of Period costs are Advertisement expenses, Selling Expenses, etc.

In the given question, Office Rent is the such type of a cost which cannot be capitalized into above mentioned accounts. Office Rent comes under the period cost category. So the correct answer is $26000.