Question

1. Classify each of the following cost in terms of

1. its cost behavior as volume changes (fixed or variable)

           (b) Whether it is a period cost that should be expensed immediately or a product cost that becomes part

                   of the cost of inventory.

           (c) If a cost is a product cost, classify it further whether it is a direct material, direct labor, or a

                 manufacturing overhead cost.

1.           1. _____     _____    ______         Straight-line depreciation of automobiles used by AT&T sales Personnel.

            2.                                                     Wages paid to a production line worker at AT&T plant.

            3.                                                     Gasoline added to a maintenance vehicle at a GM plant

           

            4.                                                     Insurance on Amoco’s corporate headquarters.

            5.                                                     Shipping raw crude oil from oil field to an Amoco refinery.

Answer 1

1. Fixed cost, Product cost, manufacturing overhead costs

Depreciation amount remains same in straight line, there is a fixed cost & itis related to manufacturing

2. Fixed cost, product cost, direct labor

wages paid to direct labor is fixedcost and direct labor comes under product cost

3. variable cost, period cost

gasoline (fuel) expense might change, therefore is a variable cost and it is a period cost

4. fixed cost, period cost

insurance of headquarter remails same, therefore is a fixed costs, and it is a period cost

5. Variable cost, period cost

Shipping cost will vary based on amount of goods, and it is a period cost since it cannot be tagged to a product