Required Indicate whether each of the following costs is a product cost or a per

Question

Required Indicate whether each of the following costs is a product cost or a period (selling and administrative) cost. Event Classification a. Cleaning supplies for the office. b. Freight on goods purchased for resale. c. Salary of the marketing director d. Freight on goods sold to customer with terms FOB destination. e. Utilities expense incurred for office building f. Advertising expense g. Insurance on vans used to deliver goods to customers. h. Salaries of sales supervisors. i. Monthly maintenance expense for a copier Goods purchased for resale

Explanation / Answer

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Event Classification Explanation a Cleaning supplies for the office Period costs -Selling and administrative They are used in office and not for manufacturing the product, hence administrative costs b Freight on goods purchased for resale Product costs Costs of bringing inventory in is product costs c Salary of marketing director Period costs -Selling and administrative Not a direct labor to be product costs d Freight on goods sold Period costs -Selling and administrative These are selling costs e utilities expense in office building Period costs -Selling and administrative Not factory overhead to be product costs f Advertising expenses Period costs -Selling and administrative Basically selling costs g Insurance on vans used to deliver goods Period costs -Selling and administrative These are selling costs h Salaries of sales supervisors Period costs -Selling and administrative Since these are sales personnel costs, selling costs i Monthly maintenance expense for a copier Period costs -Selling and administrative Copier is used in administration or selling department J Goods purchased for resale Product costs Goods itself are product costs

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