Question

U trect the statement ually incurred by Barum Corporation list of costs and expens cturer of furniture, in its factory Saries for assembly line inspectors Insurance on factory machines Property taxes on the factory building Factory repairs Upholstery used in manufacturing furniture Wages paid to assembly line workers Factory machinery depreciation Glue, nails, paint, and other small parts used in production 9. Factory supervisors' salaries. 10. Wood used in manufacturing furniture Instructions dify the above items into the following categories: (a) direct materials, (b) direct labor, and (c) man ufacturing overhead 13(LO 2).C Trak Corporation incurred the following costs while manufacturing its bicycles Bicycle components $100,000 Advertising expense $45.000 Depreciation on plant 60,000 Property taxes on plant 14,000 Property taxes on store 7.500 Delivery expense 21,000 Labor costs of assembly-line workers 110.000 Sales commissions 35.000 Factory supplies used 13,000 Salaries paid to sales clerks 50,000 Instructions a. Identify each of the above costs as direct materials, direct labor, manufacturing overhead, or period costs. b. Explain the basic difference in accounting for product costs and period costs.

Answer 1

Requirement 1

Direct materials are those raw materials used in the production of finished goods.

The labor directly related to production are direct labor

Manufacturing overhead includes all the indirect labor and materials cost related to production.

Administration and marketing expenses are period costs.

Bicycle components	100,000	Direct materials
Advertising expense	45,000	Period costs
depreciation on plant	60,000	manufacturing overhead
property taxes on plant	14,000	manufacturing overhead
property taxes on store	7,500	Period costs
cost of deliveries to customers	21,000	Period costs
labor costs of assembly-line workers	110,000	direct labor
sales commission	35,000	Period costs
factory supplies used	13,000	manufacturing overhead
salaries paid to sales clerks	50,000	Period costs

Requirement 2

Period costs are accounted as expense when they are incurred. Similarly, product costs are accounted as inventory cost when they are incurred. These inventory costs cannot be expensed till inventory is sold. These will be then treated as cost of goods sold.

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