Cost Classification
Loring Company incurred the following costs last year:
Required:
1.
Classify each cost as a product cost or period cost.
Product Cost:
The amount of cost whether direct or indirect incurred by the company in order to produce a product is known as product cost. It also means the cost incurred by the company in acquiring a product and making it available for sale.
Period costs can be defined as the costs, which are not associated with the process of manufacturing. Selling and distribution expenses are examples of period costs.
The classification of the costs is given below:
 | Product cost | Period cost | |||
Costs | Direct materials ($) | Direct labor ($) | Manufacturing Overhead ($) | Selling expense ($) | Adminis-trative expense ($) |
Direct materials | 216,000 | Â | Â | Â | Â |
Factory rent | Â | Â | 24,000 | Â | Â |
Direct labor | Â | 120,000 | Â | Â | Â |
Factory utilities | Â | Â | 6,300 | Â | Â |
Supervisi... |
2.
Calculate the amount of product cost for the previous year.
3.
Calculate the amount of period cost for the last year.
4.
Calculate the amount of unit product cost.
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