Multiple Choice
For a cost-volume-profit (CVP) analysis to be effective, which of the following assumptions must generally hold true?
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4. Merchandising Operations
Cost of Goods Sold - Perpetual Inventory vs. Periodic Inventory
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Which of the following is a direct cost of manufacturing a sport boat?
A
Factory supervisor's salary
B
Depreciation on factory equipment
C
Cost of fiberglass used in the boat's hull
D
Advertising expenses for the sport boat
Verified step by step guidance1
Understand the concept of direct costs: Direct costs are expenses that can be directly traced to the production of a specific product. These costs are directly associated with the manufacturing process and vary with the level of production.
Analyze the options provided: Review each cost to determine whether it can be directly traced to the production of the sport boat.
Evaluate the factory supervisor's salary: This is an indirect cost because it is not directly tied to the production of a single boat but rather supports the overall manufacturing process.
Evaluate the depreciation on factory equipment: This is also an indirect cost because it is a fixed expense related to the use of equipment over time and cannot be directly attributed to a single boat.
Evaluate the cost of fiberglass used in the boat's hull: This is a direct cost because the fiberglass is a material that is specifically used in the production of the sport boat and can be directly traced to the product.
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