Question

Your friend, Suzie Whitson, has designed a new type of outdoor toy that helps children learn basic concepts such as colors, numbers, and shapes. Suzie’s product will target two groups: day care centers in warm climates and home school programs. Her company is Jiffy Jet and costs for last month follow:

Factory rent	$	3,070
Company advertising		1,110
Wages paid to assembly workers		31,600
Depreciation for salespersons’ vehicles		2,020
Screws		585
Utilities for factory		840
Assembly supervisor’s salary		3,570
Sandpaper		135
President’s salary		5,070
Plastic tubing		4,100
Paint		245
Sales commissions		1,270
Factory insurance		1,050
Depreciation on cutting machines		2,040
Wages paid to painters		8,000

Assume that Suzie Whitson has decided to begin production of her outdoor children’s toy.

Required:
1 and 2. Identify each of the preceding costs as either a product or a period cost. If the cost is a product cost, decide whether it is for direct materials (DM), direct labor (DL), or manufacturing overhead (MOH) and also identify each of the preceding costs as variable or fixed cost.

3. Determine the total cost for each of the following:

Answer 1

Ans. 1 & 2		Period cost	Product cost			Variable or Fixed
	Cost by traceability		Direct materials	Direct labor	Manufacturing overhead	Variable	Fixed
	Factory rent				XXXX		XXXX
	Company advertising	XXXX				XXXX
	Wages paid to assembly workers			XXXX		XXXX
	Depreciation for salesperson's vehicles	XXXX					XXXX
	Screws		XXXX			XXXX
	Utilities for factory				XXXX	XXXX
	Assembly supervisior's salary				XXXX		XXXX
	Sandpaper				XXXX	XXXX
	President's salary	XXXX					XXXX
	Plastic tubing				XXXX	XXXX
	Paint		XXXX			XXXX
	Sales commissions	XXXX				XXXX
	Factory insurance				XXXX		XXXX
	Depreciation on cutting machines				XXXX		XXXX
	Wages paid to painters			XXXX		XXXX
Ans. 3		Period cost	Product cost			Variable or Fixed
	Cost by traceability		Direct materials	Direct labor	Manufacturing overhead	Variable	Fixed
	Factory rent				$3,070		$3,070
	Company advertising	$1,110				$1,110
	Wages paid to assembly workers			$31,600		$31,600
	Depreciation for salesperson's vehicles	$2,020					$2,020
	Screws		$585			$585
	Utilities for factory				$840	$840
	Assembly supervisior's salary				$3,570		$3,570
	Sandpaper				$135	$135
	President's salary	$5,070					$5,070
	Plastic tubing				$4,100	$4,100
	Paint		$245			$245
	Sales commissions	$1,270				$1,270
	Factory insurance				$1,050		$1,050
	Depreciation on cutting machines				$2,040		$2,040
	Wages paid to painters			$8,000		$8,000
	Total Cost	$9,470	$830	$39,600	$14,805	$47,885	$16,820
	*Expenses related to selling and administration are listed under Period costs.
	*Expenses related to manufacturing process are listed under product costs.