A manufacturing company prepays its insurance coverage for a three-year period. The premium for the three years is $2,700 and is paid at the beginning of the first year. 80% of the premium applies to manufacturing operations and 20% applies to selling and administrative activities. What amounts should be considered product and period costs respectively for the first year of coverage under variable costing system? Product Period a. $2,700 $0 b. $2,160 $540 c. $1,440 $360 d. $720 $180 e. $0 $900

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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A manufacturing company prepays its insurance coverage for a three-year period. The premium for
the three years is $2,700 and is paid at the beginning of the first year. 80% of the premium applies
to manufacturing operations and 20% applies to selling and administrative activities.
What amounts should be considered product and period costs respectively for the first year of
coverage under variable costing system?
Product Period
a. $2,700 $0
b. $2,160 $540
c. $1,440 $360
d. $720 $180
e. $0 $900
Transcribed Image Text:A manufacturing company prepays its insurance coverage for a three-year period. The premium for the three years is $2,700 and is paid at the beginning of the first year. 80% of the premium applies to manufacturing operations and 20% applies to selling and administrative activities. What amounts should be considered product and period costs respectively for the first year of coverage under variable costing system? Product Period a. $2,700 $0 b. $2,160 $540 c. $1,440 $360 d. $720 $180 e. $0 $900
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