Question

Kumee Company conducts operations in two separate buildings: a factory building where products are manufactured and the headquarters building (office space for executives, accounting, sales, etc.).

Among the costs Kumee Company incurred during the month of August were the following:

            (1)        $15,000 of coolant used in the headquarters office air conditioning systems

            (2)        $5,000 for property taxes on the factory building

            (3)        $10,000 for depreciation on trucks used to deliver products to customers

            (4)        $2,000 salary paid to a factory supervisor

The period costs from the above list total:

Group of answer choices

$7,000

$25,000

$32,000

$30,000

Answer 1

Period costs include those costs which are not related to the manufacturing activity. Administrative and selling expenses generall form part of period costs

Coolant used in office headquarter is a period cost as it is related to office administration

Property taxes on factory buidling and salary to factory supervisor can be attributed to product costs as they relate to manufacturing

Depreciation on delivery trucks are period costs

Total period costs = 15000 + 10000

= 25000