Question

Exercise 18-6 Cost classification LO C3 Tesla, a vehicle manufacturer, incurs the following costs. (1) Classify each cost as either a product or a period cost. If a product cost, identify it as direct materials, direct labor, or factory overhead, and then as a prime and/or conversion cost. (2) Classify each product cost as either a direct cost or an indirect cost using the product as the cost object (Leave no cell blank if there is no effect select "NA - Not a product cost") Answer is complete but not entirely correct. Cost by Traceability Period or Product Direct material, Direct labor, or Factory Overhead Prime or Conversion Direct or indirect 1. 2. 3. 4. Factory electricity Advertising Amortization of patents on factory machine Batteries for electric cars Office supplies used Wages to assembly workers Product Period Product Period Period Product Overhead NA - Not a product cost Overhead ⓇNA - Not a product cost® NA - Not a product cost Direct labor Conversion NA- Not a product cost Conversion NA- Not a product cost NA- Not a product cost Prime and Conversion Indirect NA- Not a product cost Indirect NA- Not a product cost A - Not a product cost Direct N 6.

Answer 1

ANSWER

PART (1)
	Cost by behavior		Cost by Function
Costs	Variable	Fixed	Product	Period
Plastic for casing	$17,000		$17,000
Wages of assembly workers	$82,000		$82,000
Property taxes on factory		$5,000	5,000
Accounting staff salaries		$35,000		$35,000
Drum stands (1,000 stands outsourced)	$26,000		$26,000
Rent cost of equipment for sales staff		$10,000		$10,000
Upper mgmt. salaries		$ 125,000		$125,000
Annual flat fee paid for maintenance service		$10,000	10,000
Sales commissions	$15 x units sold			$15 x units sold
Machinery depreciation, straight-line		$40,000	$40,000

PART (2)

True Beat
Calculation of Manufacturing cost per Drum Set
For year ended December 31,2017
Item	Total Cost	Per Units cost
Variable production cost
plastic for casting	$17,000	$17.00
wages of assembly workers	$82,000	$82.00
drum stands	$26,000	$26.00
Total variable production costs	$125,000	$125.00
Fixed production costs
property taxes on factory	$5,000	$5.00
Annual Fee for maintenance service	$10,000	$10.00
machinery depreciation	$40,000	$4.,00
Total fixed production costs	$55,000	$55.00
Total production costs	$180,000	$180.00

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