The following is a list of costs incurred by several businesses. Classify each o

Question

The following is a list of costs incurred by several businesses.

Classify each of the following costs as product costs or period costs. 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:

Costs Classification a. Cost of fabric used by clothing manufacturer b. Maintenance and repair costs for factory equipment c. Rent for a warehouse used to store raw materials and work in process 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

Explanation / Answer

Classification of Cost   COST Product Cost Period Cost a. Cost of fabric used by clothing manufacturer Direct Material b. Maintenance and repair costs for factory equipment Factory overhead c. Rent for a warehouse used to store raw materials and work in process Factory overhead d. Wages of production quality control personnel Factory overhead e. Oil lubricants for factory plant and equipment Factory overhead f. Depreciation of robot used to assemble a product Factory overhead g. Travel costs of marketing executives to annual sales meeting Selling Expenses h. Depreciation of copying machines used by the Marketing Department Selling Expenses i. Fees charged by collection agency on past-due customer accounts Administrative Expenses j. Electricity used to operate factory machinery Factory overhead k. Maintenance costs for factory equipment Factory overhead l. Pens, paper, and other supplies used by the Accounting Department in preparing various managerial reports Administrative Expenses m. Charitable contribution to United Fund Administrative Expenses n. Depreciation of microcomputers used in the factory to coordinate and monitor the production schedules Factory overhead o. Fees paid to lawn service for office grounds upkeep Administrative Expenses p. Cost of sewing machine needles used by a shirt manufacturer Factory overhead q. Cost of plastic for a telephone being manufactured Direct Material r. Telephone charges by president’s office Administrative Expenses s. Cost of 30-second television commercial Selling Expenses t. Surgeon’s fee for heart bypass surgery Direct Labor u. Depreciation of tools used in production Factory overhead v. Wages of a machine operator on the production line Direct Labor w. Salary of the vice president of manufacturing operations Factory overhead x. Factory janitorial supplies Factory overhead

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