Question

Coronado, Inc., manufactures clamps used in the overhead bin latches of several leading airplane models. Richard Miller, president of Coronado, Inc., has gathered the following cost information from the company's accounting records for the latest month of operations. Advertising Fire insurance premium for the factory building Sales office utilities Air filters for the buffing machines used to produce the clamps Aluminum used to produce the clamps Rent on the factory building Freight to ship the clamps to customers Sales department executives' salaries Production supervisors' salaries Assembly line workers' wages $22,000 $7,000 $3,000 $1,875 $36,500 $8,500 $3,125 $42,000 $21,500 $62,000 (a) Calculate the total period costs for the month. Total period costs $

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Answer 1

Product cost	Product costs are those costs that are incurred to manufacture or acquire a product. For a manufacturing company, product cost includes direct material cost, direct labor cost and manufacturing overheads
Period costs	Costs that are not included in the product cost are called as period costs. These costs are called as period costs because they are expensed in the period in which they are incurred.

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a	Total period costs                                [Refer working note 1]	$70,125
b	Total product costs                              [Refer working note 2]	$137,375
c	Manufacturing overhead incurred        [Refer working note 3]	$38,875

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Workiing note 1 - Period costs
Advertising                                                  [Indirect non-manufacturing cost]	$22,000
Sales office utilities                                    [Indirect non-manufacturing cost]	$3,000
Freight to ship the clamps to customers       [Indirect non-manufacturing cost]	$3,125
Sales department executives’ salaries         [Indirect non-manufacturing cost]	$42,000
Total period costs	$70,125

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Workiing note 2 - Product costs
Fire insurance premium for the factory building                            [Indirect manufacturing cost]	$7,000
Air filters for the buffing machines used to produce the clamps      [Indirect manufacturing cost]	$1,875
Aluminum used to produce the clamps                                              [Direct material cost = Direct manufacturing cost]	$36,500
Rent on the factory building                                                            [Indirect manufacturing cost]	$8,500
Production supervisors’ salaries                                                     [Indirect manufacturing cost]	$21,500
Assembly line workers’ wages                                                       [Direct labor cost = Direct manufacturing cost]	$62,000
Total product costs	$137,375

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Workiing note 3 - Manufacturing overhead
Fire insurance premium for the factory building                               [Indirect manufacturing cost]	$7,000
Air filters for the buffing machines used to produce the clamps      [Indirect manufacturing cost]	$1,875
Rent on the factory building                                                            [Indirect manufacturing cost]	$8,500
Production supervisors’ salaries                                                     [Indirect manufacturing cost]	$21,500
Manufacturing overhead incurred	$38,875