Question

Watson Inc. is a manufacturing company operating in the southeastern United States. The company has three primary product lines, as well as several "secondary" lines. The company's controller is in the process of preparing the annual financial statements and will need to classify the following cost objects as either product costs or period costs. For each of these costs, determine the amounts that will be considered product costs versus the amounts that will be considered period costs and enter them into the appropriate column.

Cost Object	Product Costs	Period Costs
Watson paid $2.5 million in interest costs for a new debt issuance—the proceeds were used to fund the construction of a new manufacturing plant.
Payments to SE EMC, the utilities company which provides both gas and electric to Watson, totaled $3.6 million for the year.
The invoice price for raw materials for the year totaled $9,415,200, which included a discount of 2 percent off of the original purchase prices and freight- in of $7,200.
Watson spent $5.1 million on advertising costs during the year, with $350,000 of the total representing the salaries of the staff in the promotions department.
Rent costs for several buildings located outside of the company's main campus and used to manufacture secondary product lines totaled $7.2 million.
Salaries associated with staff members in Watson's Human Resources and General Counsel departments totaled $5.9 million.
The company's factory workers at the main plant average an annual salary of $55,000 per year, with fringe benefits costing the company 15 percent of salary per worker. There are 50 factory workers at the main plant.
Watson also employs a custodial staff of 15 employees at its main plant; these employees earn an average of $30,000 per year with fringe benefits costing the company on average 25 percent of labor costs for this group.

Answer 1

ANSWER~ DEFINATION OF PRODUCT COST

. Product cost are associate with the purchase and sale of goods. in the production scenario ,such cost are associate with the acquisition and conversation of material and all other manufacturing input into finished product for sale . HENCE under absorption cost, total manufacturing costs constitute inventoriable or product cost.

PERIODS COSTS ~ period cost are cost ,which are not assigned to the products but are charged as expense against revenue of the period in which they are incurred. General administration , marketing,sales and distributor overhead s are recognized as period costs .

as per the given information in the question determine the product COST and period cost

COST OBJECT. Product cost /PERIOD COST

1- product cost

2- 3.6 million is. period cost

3-. 9415200 -2% =9226896 product cost aslo include freight 7200

4-. $350000 is period cost and remaining the amount is product cost

5- . 7.2 million is product cost

6-. 5.9 million is a period cost

7- .

8-.

7 and 8 I can not be determined