Question

Test 2 of 2 53 MINUTES 56 SECONDS Product Versus Period Costs Cute Copy Paste Watson Inc. is a manufacturing company operating in the southeastern United States. The company has the primary product lines, as well as several secondary lines. The company's controller is in the process of preparing the annual financial statements and will need to classify the following cost objects as either product costs or period costs. For each of these coss, determine the amounts that will be considered productos versus the amounts that will be considered period costs Cost Object Product Costs Period Costs 12 $2,500,000 1. Watson paid $2.5 million in interest costs for a new 2 debt issuance-the proceeds were used to fund the construction of a new manufacturing plant. 2. Payments to SE EMC, the utilities company which 3 provides both gas and electric to Watson, totaled $3.6 million for the year. $3,600,000 3. The invoice price for raw materials for the year totaled $9.415,200, which included a discount of 2 percent off of the original purchase prices and freight-in of $7,200 $9,415,200 4. Watson spent $5.1 million on advertising costs during 5 the year with $350,000 of the total representing the salaries of the staff in the promotions department $5,450,000 5. Rent costs for several buildings located outside of the 6 company's main camous and used to manufacture $7.200.000 MacBook Air

Answer 1

An increase in price leads to decrease in quantity demanded or produced.

A decrease in price leads to an increase in quantity demanded or produced in a product.

According to law and supply of demand there is an inverse relationship between the price of the product and quantity demanded and there is a direct relationship with between the price and the quantity demanded.