Certified Internal Auditor (CIA) Part 3: Business Knowledge for Internal Auditing — Question 211

When using the absorption costing approach, which of the following should be categorized as a period cost?

Answer options

• A. Selling expenses.
• B. Fixed manufacturing overhead.
• C. Direct labor.
• D. Variable manufacturing overhead.

Correct answer: A

Explanation

Selling expenses are considered period costs because they are not tied directly to the production of goods. In contrast, fixed manufacturing overhead, direct labor, and variable manufacturing overhead are all costs associated with production and are thus classified as product costs.