Product costs:
Product costs are the costs which are incurred in the production of the goods. These costs include the direct materials cost, direct labor cost, and factory overhead cost.
Period costs:
Period costs are the costs other than the product costs. These costs are not incurred in manufacturing the goods. These costs include the administrative expenses, and selling expenses.
To classify: Each of the costs as either a product cost or a period cost, and to indicate whether it is a direct material cost, direct labor cost, or a factory overhead cost if it is product cost, and whether it is a selling expense, or administrative expense if it is period cost.
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Chapter 15 Solutions
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- Classifying Costs as Materials, Labor, or Factory Overhead Indicate whether each of the following costs of an automobile manufacturer would be classified as direct materials cost, direct labor cost, or factory overhead cost: Cost Classification a. Automobile engine b. Brake pads c. Depreciation of robotic assembly line equipment d. Glass for front and rear windshields e. Safety helmets and masks for assembly line workers f. Salary of quality control inspector g. Steering wheel h. Tires i. Wages of assembly line workersarrow_forwardClassifying period costs and product costs Lawlor, Inc. is the manufacturer of lawn care equipment. The company incurs the following costs while manufacturing weed trimmers: Shaft and handle of weed trimmer The motor of weed trimmer Factory labor for workers assembling weed trimmers Nylon thread used by the weed trimmer (not traced to the product) Glue to hold the housing together Plant janitorial wages Depreciation on factory equipment Rent on plant Sales commissions Administrative salaries Plant utilities Shipping costs to deliver finished weed trimmers to customers Requirements Describe the difference between period costs and product costs. Classify Lawlor’s costs as period costs or product costs. If the costs are product costs, further classify them as direct materials, direct labor, or manufacturing overhead.arrow_forwardListed here are product costs for the production of soccer balls. Identify each cost (a) as either fixed or variable and (b) as either direct or indirect by selecting the appropriate dropdowns. Product Cost Variable or Fixed Direct or Indirect 1. Coolants for machinery 2. Benefits for assembly workers 3. Annual flat fee paid for factory security 4. Machinery depreciation (straight-line) 5. Rubber core for soccer balls 6. Insurance on factory 7. Factory rentarrow_forward
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- Assigning Costs to a Cost Object, Direct and Indirect Costs Hummer Company uses manufacturing cells to produce its products (a cell is a manufacturing unit dedicated to the production of subassemblies or products). One manufacturing cell produces small motors for lawn mowers. Suppose that the motor manufacturing cell is the cost object. Assume that all or a portion of the following costs must be assigned to the cell. a. Salary of cell supervisor b. Power to heat and cool the plant in which the cell is located c. Materials used to produce the motors d. Maintenance for the cells equipment (provided by the maintenance department) e. Labor used to produce motors f. Cafeteria that services the plants employees g. Depreciation on the plant h. Depreciation on equipment used to produce the motors i. Ordering costs for materials used in production j. Engineering support (provided by the engineering department) k. Cost of maintaining the plant and grounds l. Cost of the plants personnel office m. Property tax on the plant and land Required: Classify each of the costs as a direct cost or an indirect cost to the motor manufacturing cell.arrow_forwardPocket Umbrella, Inc. is considering producing a new type of umbrella. This new pocket-sized umbrella would fit into a coat pocket or purse. Classify the following costs of this new product as direct materials, direct labor, manufacturing overhead, or selling and administrative. Cost of advertising the product Fabric used to make the umbrellas Maintenance of cutting machines used to cut the umbrella fabric so it will fit the umbrella frame Wages of workers who assemble the product Presidents salary The salary of the supervisor of the people who assemble the product Wages of the product tester who stands in a shower to make sure the umbrellas do not leak Cost of market research survey Salary of the companys sales managers Depreciation of administrative office buildingarrow_forwardThis list contains costs that various organizations incur; they fall into three categories: direct materials (DM), direct labor (DL), or overhead (OH).t Classify each of these items as direct materials, direct labor, or overhead. Glue used to attach labels to bottles containing a patented medicine. Compressed air used in operating paint sprayers for Student Painters, a company that paints houses and apartments. Insurance on a factory building and equipment. A production department supervisors salary. Rent on factory machinery. Iron ore in a steel mill. Oil, gasoline, and grease for forklift trucks in a manufacturing companys warehouse. Services of painters in building construction. Cutting oils used in machining operations. Cost of paper towels in a factory employees washroom. Payroll taxes and fringe benefits related to direct labor. The plant electricians salaries. Crude oil to an oil refinery. Copy editors salary in a book publishing company. Assume your classifications could be challenged in a court case. Indicate to your attorneys which of your answers for part a might be successfully disputed by the opposing attorneys and why. In which answers are you completely confident?arrow_forward
- Assign each of the following expenses to either the machine cost pool or the factory cost pool: A. property taxes B. heat and air-conditioning C. electricity, machines D. plant depreciation E. electricity, plant F. machine maintenance wagesarrow_forwardClassifying period costs and product costs Lawlor, Inc. is the manufacturer of lawn care equipment. The company incurs the following costs while manufacturing weed trimmers: • Shaft and handle of weed trimmer • Motor of weed trimmer • Factory labor for workers assembling weed trimmers • Nylon thread used by the weed trimmer (not traced to the product) • Glue to hold the housing together • Plant janitorial wages • Depreciation on factory equipment • Rent on plant • Sales commissions • Administrative salaries • Plant utilities • Shipping costs to deliver finished weed trimmers to customers Requirements 1. Describe the difference between period costs and product costs. 2. Classify Lawlor’s costs as period costs or product costs. If the costs are product costs, further classify them as direct materials, direct labor, or manufacturing overhead.arrow_forwardIdentify the following costs as a prime cost (P), conversion cost (C), or both (B) for an automobile manufacturer:a. Wages of employees that operate painting equipmentb. Wages of the plant managerc. Steeld. Oil used for assembly line machineryarrow_forward
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