Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

4. Merchandising Operations

Single-step Income Statement

Financial Accounting

4. Merchandising Operations

Single-step Income Statement

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Multiple Choice

On a single-step income statement, which of the following would be classified as a period cost?

Direct labor

Factory overhead

Selling expenses

Direct materials used in production

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Verified step by step guidance

Understand the concept of period costs: Period costs are expenses that are not directly tied to the production process. These costs are incurred over a specific period and are typically associated with selling, administrative, or general business operations.

Review the classification of costs: Direct labor, factory overhead, and direct materials used in production are considered product costs because they are directly related to the manufacturing process. Selling expenses, on the other hand, are not tied to production and are classified as period costs.

Identify the correct classification: Selling expenses are incurred to promote and sell the product, such as advertising, sales commissions, and delivery expenses. These are considered period costs because they are not part of the manufacturing process.

Relate to the single-step income statement: In a single-step income statement, all revenues are grouped together, and all expenses are grouped together. Period costs like selling expenses are included in the expenses section, separate from product costs.

Conclude the classification: Based on the definitions and classifications, selling expenses are correctly identified as period costs, while direct labor, factory overhead, and direct materials used in production are product costs.