Question

Problems Problem I (10 Points) Classify the following costs for an auto manufacturers either direct materials, direct labor manufacturing overhead, or period costs Direct Direct Manufacturi Materials Lahor Overhead Steel tein tomobiles Assembly department employee wages c. Unility costs used in executive bilding d. Travel Costs of sales personnel e. Cost of shipping goods to customers Property taxes on assembly plan sa Glass in automobiles h. Factory maintenance supplies Depreciation on assembly plant Plant manager's salary RCEO's salary 1. Depreciation on executive building m. Salary of marketing executive n. Tires installed on automobiles a Advertising XNXX Required: Complete the answer sheet above by placing an "X" under each heading that identifies the cost involved. Problem 2 (25 Points) Shantz Corporation has provided the following data concerning last month's operations Purchases of raw materials Indirect materials included in manufacturing overhead Direct labor cost Manufacturing overhead applied to Work in Process Overapplied overhead $23.000 $4,000 $58,000 S90,000 $1,000 Raw materials inventory Work in process inventory Finished goods inventory Beginning SI2,000 $50,000 $41,000 Ending $16,000 $53,000 $47.000 Any underapplied or overapplied manufacturing overhead is closed out to cost of goods sold. Page 6

Answer 1

Answer to Problem 1 (First question in the list): Items Direct Material Direct Labor Mfg. Overhead Period Cost X a.Steel used in automobiles b.Assembly department employee wages c.Utility costs used in executive building d.Travel costs used by sales personnel e.Cost of shipping goods to customers f.Property taxes on assembly plant g. Glass used in automobiles h. Maintenance supplies i.Depreciation on assembly plant j.Plant manager's salary k.CEO's salary 1.Depreciation on executive building m.Salary of marketing executive n.Tires installed on automobiles o.Advertising X X X

Explanation: Product costs are those costs which are incurred at factory to produce required number of units. They may be direct or indirect in nature. Direct costs are those product costs that are directly attributable to products manufactured. In other words, these costs are avoidable costs in nature and are not expected to incur if there is no production. Examples are: Direct Materials (DM) and Direct Labor (DL). Indirect costs (Mfg. overhead costs) are those product costs that are not directly attributable to products manufactured but are common costs incurred in the factory. These costs are unavoidable costs. Examples: Factory insurance, Indirect materials, Indirect labor, etc. Period costs are those costs which are not incurred at factory during production process. In other words, these costs are incurred to carry out firm's operating activities such as selling and adminitrative expenses. These costs include even financial expenses such as interest expense, etc. Therefore,