Question

Insurance expense incurred on a factory building would be treated as a

a. selling cost
b. period cost
c. direct cost
d. product cost

Answer 1

Insurance expense on a factory building is classified as a product cost, which is part of the overhead and fixed costs in manufacturing.

Step-by-step explanation:

Insurance expense incurred on a factory building is treated as a product cost. Product costs are those costs that are incurred to acquire or manufacture a product. In the context of a factory, insurance expense is part of the overhead costs, which are necessary to ensure that the production facility operates smoothly.

This type of expense does not fluctuate with the volume of production and is therefore considered a fixed cost. As part of the factory overhead, insurance expense is included in the cost of producing goods and consequently allocated to the products themselves.