Question

Which of the following statements is correct?A The costs associated with getting products and services ready for sale are known as costs of goods sold. B The matching principle in GAAP requires that we separate conversion costs and overhead.C The matching principle in GAAP requires that we separate selling and administrative costs. D The costs associated with getting products and services ready for sale are known as opportunity costs. E The matching principle in GAAP requires that we separate product costs and period costs.

Answer 1

A The costs associated with getting products and services ready for sale are known as costs of goods sold.

Step-by-step explanation:

The cost which is associated for making a product worth of sale is cost of goods sold, which includes cost of goods manufactured + cost of selling and administration.

US GAAP requires the matching principle to be followed which states to match all revenues against expenses.

There is no such principle of separating conversion cost with overheads or separating selling and administrative cost.

Opportunity cost is the revenue forgone for earning the current revenue, that is the net benefit of the best opportunity forgone.

Matching principle does not require that we separate product costs with that of period cost.

Therefore correct statement is

A The costs associated with getting products and services ready for sale are known as costs of goods sold.