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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. Salary of quality control supervisor
  2. b. Packing supplies for products sold. These supplies are a very small portion of the total cost of the product.
  3. c. Factory operating supplies
  4. d. Depreciation of factory equipment
  5. e. Hourly wages of warehouse laborers
  6. f. Wages of company controller’s secretary
  7. g. Maintenance and repair costs for factory equipment
  8. h. Paper used by commercial printer
  9. i. Entertainment expenses for sales representatives
  10. j. Protective glasses for factory machine operators
  11. k. Sales commissions
  12. l. Cost of hogs for meat processor
  13. m. Cost of telephone operators for a toll-free hotline to help customers operate products
  14. n. Hard drives for a microcomputer manufacturer
  15. o. Lumber used by furniture manufacturer
  16. p. Wages of a machine operator on the production line
  17. q. First-aid supplies for factory workers
  18. r. Tires for an automobile manufacturer
  19. s. Paper used by Computer Department in processing various managerial reports
  20. t. Seed for grain farmer
  21. u. Health insurance premiums paid for factory workers
  22. v. Costs of information technology support for the corporate headquarters
  23. w. Costs for television advertisement
  24. x. Executive bonus for vice president of marketing

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. Place an  “X “ in tile 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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