Inventoriable costs versus period costs. Each of the following cost items pertains to one of these companies: Best Buy (a merchandising-sector company), KitchenAid (a manufacturing-sector company), and HughesNet (a service-sector company):a. Cost of phones and computers available for sale in Best Buy’s electronics departmentb. Electricity used to provide lighting for assembly-line workers at a KitchenAid manufacturing plantc. Depreciation on HughesNet satellite equipment used to provide its servicesd. Electricity used to provide lighting for Best Buy’s store aislese. Wages for personnel responsible for quality testing of the KitchenAid products during the assembly processf. Salaries of Best Buy’s marketing personnel planning local-newspaper advertising campaignsg. Perrier mineral water purchased by HughesNet for consumption by its software engineersh. Salaries of HughesNet area sales managersi. Depreciation on vehicles used to transport KitchenAid products to retail storesRequired:Classify each of the cost items as an inventoriable cost or a period cost. Explain your answers.
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Inventoriable costs versus period costs. Each of the following cost items pertains to one of these companies: Best Buy (a merchandising-sector company), KitchenAid (a manufacturing-sector company), and HughesNet (a service-sector company):
a. Cost of phones and computers available for sale in Best Buy’s electronics department
b. Electricity used to provide lighting for assembly-line workers at a KitchenAid manufacturing plant
c.
d. Electricity used to provide lighting for Best Buy’s store aisles
e. Wages for personnel responsible for quality testing of the KitchenAid products during the assembly process
f. Salaries of Best Buy’s marketing personnel planning local-newspaper advertising campaigns
g. Perrier mineral water purchased by HughesNet for consumption by its software engineers
h. Salaries of HughesNet area sales managers
i. Depreciation on vehicles used to transport KitchenAid products to retail stores
Required:
Classify each of the cost items as an inventoriable cost or a period cost. Explain your answers.
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