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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Classifying costs

The following is a list of costs that were incurred in the production and sale of lawn mowers:

  1. a. Premiums on insurance policy for factory buildings
  2. b. Tires for lawn mowers
  3. c. Filter for spray gun used to paint the lawn mowers
  4. d. Paint used to coat the lawn mowers, the cost of which is immaterial to the cost of the final product
  5. e. Plastic for outside housing of lawn mowers
  6. f. Salary of factory supervisor
  7. g. Hourly wages of operators of robotic machinery used in production
  8. h. Engine oil used in mower engines prior to shipment
  9. i. Salary of vice president of marketing
  10. j. Property taxes on the factory building and equipment
  11. k. Cost of advertising in a national magazine
  12. l. Gasoline engines installed in the lawn mowers
  13. m. Electricity used to run the robotic machinery
  14. n. Straight-line depreciation on the robotic machinery used to manufacture the lawn mowers
  15. o. Salary of quality control supervisor who inspects each lawn mower before it is shipped
  16. p. Attorney fees for drafting a new lease for headquarters offices
  17. q. Payroll taxes on hourly assembly line employees
  18. r. Telephone charges for company controller’s office
  19. s. Steering wheels for lawn mowers
  20. t. Factory’ cafeteria cashier’s wages
  21. u. Cash paid to outside firm for janitorial services for factory
  22. v. Maintenance costs for new robotic factory equipment, based on hours of usage
  23. w. Cost of boxes used in packaging lawn mowers, which are a significant portion of the total product cost
  24. x. License fees for use of patent for lawn mower blade, based on the number of lawn mowers produced
  25. y. Steel used in producing the lawn mowers
  26. z. Commissions paid to sales representatives, based on the number of lawn mowers sold Instructions

Classify each cost as either a product cost or a period cost. Indicate whether each product cost is a direct materials cost, a direct labor cost, or a factory overhead cost. Indicate whether each period cost is a selling expense or an administrative expense. Use the following tabular headings for your answer, placing an X” in the appropriate column:

images

To determine

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.

Explanation

Classify each of the costs as either a product cost or a period cost, and indicate whether it is a direct material cost, direct labor cost, or a factory overhead cost or whether it is a selling expense, or administrative expense.

Cost Product Costs Period Costs
Direct Materials Cost Direct Labor Cost Factory Overhead Cost Selling Expense Administrative Expense
a. X
b. X
c. X
d. X
e. X
f. X
g. X
h. X
i. X
j. X
k. X
l. X
m. X
n. X
o. X
p. X
q. X
r. X
s. X
t. X
u. X
v...

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