The following is a list of costs incurred by several businessorganizations: (a)
ID: 2433861 • Letter: T
Question
The following is a list of costs incurred by several businessorganizations:(a) Telephone cable for a telephone company.
(b) Subscription to a health club forexecutives.
(c) Salary of the Director of InternalAuditing.
(d) Long-distance telephone bill for calls madeby salespersons.
(e) Carrying cases for a manufacturer of videocamcorders.
(f) Cotton for a textile manufacturer of bluejeans.
(g) Bandages for the emergency room of ahospital.
(h) Cost of company holiday party.
(i) Electricity used to operate factorymachinery.
(j) State unemployment compensation taxes forfactory workers.
Classify each of the preceding costs as product costs or periodcosts. For those costs classified as product costs, indicatewhether the product cost is a direct materials cost, direct laborcost, or factory overhead cost. For those costs classified asperiod costs, indicate whether the period cost is a selling expenseor an administrative expense.
Explanation / Answer
Product Cost
Period Cost
DM Cost
Administrative expense
Administrative expense
Selling expense
DM Cost
DM Cost
OH Cost
Administrative expense
Factory OH
Factory OH
Product Cost
Period Cost
Telephone cable for a telephonecompanyDM Cost
Subscription to a healthclub for executivesAdministrative expense
Salary of the Director of InternalAuditingAdministrative expense
Long-distance telephone bill for callsmade by salespersonsSelling expense
Carrying cases for a manufacturer of videocamcordersDM Cost
Cotton for a textile manufacturer of bluejeansDM Cost
Bandages for the emergency room of ahospitalOH Cost
Cost of company holiday partyAdministrative expense
Electricity used to operate factorymachineryFactory OH
State unemployment compensation taxes forfactory workersFactory OH
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