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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 incurred by several businesses:

  1. a. Cost of fabric used by clothing manufacturer
  2. b. Maintenance and repair costs for factory equipment
  3. c. Rent for a warehouse used to store raw materials and work in process
  4. d. Wages of production quality control personnel
  5. e. Oil lubricants for factory plant and equipment
  6. f. Depreciation of robot used to assemble a product
  7. g. Travel costs of marketing executives to annual sales meeting
  8. h. Depreciation of copying machines used by the Marketing Department
  9. i. Fees charged by collection agency on past-due customer accounts
  10. j. Electricity used to operate factory machinery
  11. k. Maintenance costs for factory equipment
    1. 1. Pens, paper, and other supplies used by the Accounting Department in preparing various managerial reports
  12. l. Charitable contribution to United Fund
  13. m. Depreciation of microcomputers used in the factory to coordinate and monitor the production schedules
  14. n. Fees paid to lawn service for office grounds upkeep
  15. o. Cost of sewing machine needles used by a shirt manufacturer
  16. p. Cost of plastic for a telephone being manufactured
  17. q. Telephone charges by president’s office
  18. r. Cost of 50-second television commercial
  19. s. Surgeon’s fee for heart bypass surgery
  20. t. Depreciation of tools used in production
  21. u. Wages of a machine operator on the production line
  22. v. Salary of the vice president of manufacturing operations
  23. w. Factory janitorial supplies

Instructions

Classify each of the preceding costs as a product cost or 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 preparing 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...

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