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Give ONE argument either in favor of treating fixed manufacturing costs as product costs, or in...

Question:

Give ONE argument either in favor of treating fixed manufacturing costs as product costs, or in favor of treating them as period costs.

Definitions:

Period costs :Period costs are costs that are recorded as an expense in the period they are incurred

Product costs :Product cost are costs that are capitalized to the cost of an asset they relate to and thus form part of cost of sales of an asset when it is sold and carrying amount when on hand.

Fixed manufacturing costs :These are manufacturing costs that do not change depending on the number of units.

Answer and Explanation:

Argument in favor of treating fixed manufacturing costs as product costs

Fixed manufacturing costs are also necessary for the production of the goods and should thus be allocated to the goods that they were incurred to produce.


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