PR 16-2A Classifying costs Describe and illustrate the following costs: direct a

Question

PR 16-2A Classifying costs Describe and illustrate the following costs: direct and indirect costs; direct materials, direct labor, and factory overhead costs; and product and period costs. The following is a list of costs incurred by several businesses: a.Cost of fabric used by clothing manufacturer b.Maintenance and repair costs for factory equipment c.Rent for a warehouse used to store work in process and finished products d.Wages of production quality control personnel e.Oil lubricants for factory plant and equipment f.Depreciation of robot used to assemble a product g.Travel costs of marketing executives to annual sales meeting h.Depreciation of copying machines used by the Marketing Department i.Fees charged by collection agency on past-due customer accounts j.Electricity used to operate factory machinery k.Maintenance costs for factory equipment l.Pens, paper, and other supplies used by the Accounting Department in preparing various managerial reports m.Charitable contribution to United Fund n.Depreciation of microcomputers used in the factory to coordinate and monitor the production schedules o.Fees paid to lawn service for office grounds upkeep p.Cost of sewing machine needles used by a shirt manufacturer q.Cost of plastic for a telephone being manufactured r.Telephone charges by president's office s.Cost of 30-second television commercial t.Surgeon's fee for heart bypass surgery u.Depreciation of tools used in production v.Wages of a machine operator on the production line w.Salary of the vice president of manufacturing operations x.Factory janitorial supplies 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:

Explanation / Answer

Solution:

Selling Expences:

Travel costs of marketing

Fees charged by collection agency

Administration Expences:

Charitable contribution

Pens, paper, and other supplies

Rent for a warehouse

Maintenance and repair costs

Depreciation of copying machines

Rent for a warehouse

Fees paid to lawn service

Cost of sewing machine

Telephone charges

Cost of television commercial

Factory Overheads:

Depreciation of microcomputers

Maintenance costs for factory

Depreciation of tools

Factory janitorial supplies

Manufacturing Expencess:

Cost of fabric

Salary of the vice president

Cost of plastic for a telephone

Direct Material Cost:

Oil lubricants for factories

Direct Labour Expencess:

Wages of a machine operator

Surgeon's fee

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