Question

Classifying Costs The following is a list of costs that were incurred in the production and sale of large comedor Classify each cost as either a product cost or a period cost. Indicate whether each product cost is a direct materials costa direct labor contra factory overhead cost Indicate whether each period cost is a selling expense or an administrative expense. Costs Classification a. Salary of chief compliance officer of company b. Power used by painting equipment c. Instrument panel installed in the airplane cockpit Ilm/" d. Annual bonus paid to the chief operating officer of the com e. Turbo-charged airplane engine 1. Interior trim material used throughout the airplane cabin 9. Cost of normal scrap from production of airplane body > > > Ill. h. Hourly wages of employees that assemble the airplane i. Salary of the marketing department personnel j. Cost of paving the headquarters employee parking lot k. Cost of electrical wiring throughout the airplane I Cost of electronic guidance system installed in the airplane cockpit Previous Check My Work

Answer 1

Explanation :

Product Cost : Those cost which are variable or fixed in nature but related to the product, it means are incurred only when there is production are called product cost. With the change in the level of production these cost also change and are completely dependent on level of product. Further classification of product cost :

• Direct Material Cost : Such variable cost incurred over the material used for production whose cost can conveniently be divisible to each unit and the cost is traceable per unit are considered as direct material cost.
• Direct Labor Cost : Such variable cost incurred over the labor used for production whose cost can conveniently be divisible to each unit and the cost is traceable per unit are considered as direct labor cost.
• Factory Overhead Cost : Such variable or fixed cost incurred over the material,labor or any other expense for production whose cost cannot be divisible to each unit and the cost is untraceable to per unit are considered as factory overhead cost.

Period Cost : Those cost of the business which are not incurred in production, these cost are incurred irrespective of the production. Even if no production these cost are incurred.Further classification of product cost :

• Selling Expense : Those expense which are incurred for the distribution and selling of the product produced are classified as selling expense.
• Administrative expense : Those expense which are incurred in the office and administration of the business are considered as administrative expense.

Now from the above discussion we know what is product and period cost and there further classification now we will answer the questions :

a. It is Period Cost and Administrative Expense : As it is not related to production and hence it is period cost and related to administration so categorize as administrative expense

b. It is Product Cost and Factory Overhead : It is product cost as it related to production and cannot be traced over a individual unit and hence classified as factory overhead cost.

c. It is Product Cost and Direct Material Cost : It is product cost as it related to production and can be traced over a individual unit and incurred over material and hence classified as direct material cost.

d. It is Period Cost and Administrative Expense : As it is not related to production and hence period cost and related to administration so categorize as administrative expense

e. It is Product Cost and Direct Material Cost : It is product cost as it related to production and can be traced over a individual unit and incurred over material and hence classified as direct material cost.

f. It is Product Cost and Direct Material Cost : It is product cost as it related to production and can be traced over a individual unit and incurred over material and hence classified as direct material cost.

g. It is Product Cost and Factory Overhead : It is product cost as it related to production and cannot be traced over a individual unit and hence classified as factory overhead cost.

h. It is Product Cost and Direct Labor Cost : It is product cost as it related to production and can be traced over a individual unit and incurred over labor and hence classified as direct material cost.

i. It is Period Cost and Selling Expense : As it is not related to production and hence it is period cost and related to marketing and selling so categorize as selling expense

j. It is Period Cost and Administrative Expense : As it is not related to production and hence period cost and related to administration so categorize as administrative expense

k. It is Product Cost and Factory Overhead : It is product cost as it related to production and cannot be traced over a individual unit and hence classified as factory overhead cost.

l. It is Product Cost and Direct Material Cost : It is product cost as it related to production and can be traced over a individual unit and incurred over material and hence classified as direct material cost.

m. It is Product Cost and Factory Overhead : It is product cost as it is labor cost related to production and cannot be traced over a individual unit and hence classified as factory overhead cost.

n. It is Period Cost and Selling Expense : As it is not related to production and hence it is period cost and related to marketing and selling so categorize as selling expense

o. It is Period Cost and Administrative Expense : As it is not related to production and hence period cost and related to administration so categorize as administrative expense

p.  It is Product Cost and Direct Material Cost : It is product cost as it related to production and can be traced over a individual unit and incurred over material and hence classified as direct material cost.

q. It is Period Cost and Selling Expense : As it is not related to production and hence it is period cost and related to marketing and selling so categorize as selling expense

r.  It is Product Cost and Direct Material Cost : It is product cost as it related to production and can be traced over a individual unit and incurred over material and hence classified as direct material cost.

s. It is Product Cost and Factory Overhead : It is product cost as it is related to production and cannot be traced over a individual unit and hence classified as factory overhead cost.

t. It is Product Cost and Direct Material Cost : It is product cost as it related to production and can be traced over a individual unit and incurred over material and hence classified as direct material cost.

u. It is Product Cost and Factory Overhead : It is product cost as it is related to production and cannot be traced over a individual unit and hence classified as factory overhead cost.

v.  It is Period Cost and Selling Expense : As it is not related to production and hence it is period cost and related to marketing and selling so categorize as selling expense

w.  It is Product Cost and Factory Overhead : It is product cost as it is related to production and cannot be traced over a individual unit and hence classified as factory overhead cost.

x. It is Product Cost and Factory Overhead : It is product cost as it is related to production and cannot be traced over a individual unit and hence classified as factory overhead cost.

y.  It is Product Cost and Factory Overhead : It is product cost as it is a material cost and related to production and can be traced over a individual unit but the cost is immaterial and inconvenient to be traced over per and hence classified as factory overhead cost.

z.  It is Period Cost and Administrative Expense : As it is not related to production and hence period cost and related to administration so categorize as administrative expense

Regards