Question

The following calendar year-end information is taken from the December 31, 2015, adjusted trial balance and other records of Leone Company Problem 18-2A Classifying costs C2 C3 Advertising expense ....... Depreciation expense-Office equipment .... Depreciation expense-Selling equipment Depreciation expenseFactory equipment Factory supervision Factory supplies used Factory utilities Direct labor Indirect labor $ 28,750 Miscellaneous production costs 7,250 Office salaries expense 8,600 Raw materials purchases 33,550 Rent expense Office space 102,600 Rent expense--Selling space 7,350 Rent expense-Factory building 33,000 Maintenance expense-Factory equipment ... 675,480 Sales .......... 56.875 Sales salaries expense ...... 8.425 63.000 925.000 22.000 26,100 76,800 35.400 4.462500 392560 Required 1. Identify and classify each of the costs above as either a product or period cost. 2. Classify each of the product costs as either direct materials, direct labor, or factory overhead. 3. Classify each of the period costs as either selling or general and administrative expenses.

Answer 1

						1	2	3
	Costs					Product cost or period cost	Type of product cost	Type of period cost
1	Advertisng expense					Period cost		Selling expenses
2	Depreciation expense—Office equipment					Period cost		General and administrative expenses
3	Depreciation expense—Selling equipment					Period cost		Selling expenses
4	Depreciation expense—Factory equipment					Product cost	Factory overhead
5	Factory supervision					Product cost	Factory overhead
6	Factory supplies used					Product cost	Factory overhead
7	Factory utilities					Product cost	Factory overhead
8	Direct labor					Product cost	Direct labor
9	Indirect labor					Product cost	Factory overhead
10	Miscellaneous production costs					Product cost	Factory overhead
11	Office salaries expense					Period cost		Selling expenses
12	Raw materials purchases					Product cost	Direct material
13	Rent expense—Office space					Period cost		General and administrative expenses
14	Rent expense—Selling space					Period cost		Selling expenses
15	Rent expense—Factory building					Product cost	Factory overhead
16	Maintenance expense—Factory equipment					Product cost	Factory overhead
17	Sales salaries expense					Period cost		Selling expenses
	Product costs are costs associated with manufacturing the products while period cost are not directly related to manufacturing