Question

Exercise 1-3 CIlassifying Costs as Product or Period Costs [LO1-3] Suppose that you have been given a summer job as an intern at Issac Aircams, a company that manufactures sophisticated spy cameras for remote-controlled military reconnaissance aircraft. The company, which is privately owned, has approached a bank for a loan to help finance its growth. The bank requires financial statements before approving the loan. Required: Classify each cost listed below as either a product cost or a period cost for the purpose of preparing financial statements for the bank. Product Cost / Period Cost Costs 1. Depreciation on salespersons' cars. 2. Rent on equipment used in the factory. 3. Lubricants used for machine maintenance. 4. Salaries of personnel who work in the finished goods warehouse. 5. Soap and paper towels used by factory workers at the end of a shift. 6. Factory supervisors' salaries. 7. Heat, water, and power consumed in the factory. 8. Materials used for boxing products for shipment overseas. (Units are not normally boxed.) 9. Advertising costs. 10. Workers' compensation insurance for factory employees. 11. Depreciation on chairs and tables in the factory lunchroom. 12. The wages of the receptionist in the administrative offices. 13. Cost of leasing the corporate jet used by the company's executives. 14. The cost of renting rooms at a Florida resort for the annual sales conference. 15. The cost of packaging the company's product. тmmmтт т т

Answer 1

	cost
1	depreciation on salespersons cars.			Period cost
2	Rent on equipment used in the factory			Product cost
3	Lubricants used for machine maintenance			Product cost
4	Salaries of personnel who work in the finished goods warehouse			Period cost
5	Soap and paper towels used by factory workers at the end of a shift.			Product cost
6	Factory supervisors salaries			Product cost
7	Heat, water, and power consumed in the factory			Product cost
8	Materials used for boxing products for shipment overseas. (Unites are not normally boxed)			Product cost
9	Advertising cost			Period cost
10	Workers compensation insurance for factory employees			Product cost
11	Depreciation on chairs and tables in the factory lunchroom			Product cost
12	The wages of the receptionist in the administrative offices			Period cost
13	Cost of leasing the corporate jet used by the company’s executives			Period cost
14	The cost of renting rooms at a Florida resort for the annual sales conference			Period cost
16	The cost of pakaging			Product cost
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