Question

1. Indicate whether each item below is a product cost (inventoriable cost) or a period cost....

1. Indicate whether each item below is a product cost (inventoriable cost) or a period cost. If it’s a product cost say whether it is DM (direct materials), DL (direct labor) or MO (manufacturing overhead, also called indirect manufacturing costs). If it is a period cost, indicate whether it is AE (administrative expense) or SE (selling expense). These costs are for a company that makes tires.

a. Cost of the rubber that goes into the tire

b. Depreciation cost of $10,000 per year for equipment used by the company’s top management

c. Depreciation cost of $15,000 per year for machines used in the factory where the tires are made

d. Depreciation cost of $12,000 per year for cars used by the company’s salespeople

e. Cost of paying $15 per hour to the workers who make the tires. The more tires that are made, the more hours the workers work.

f. Commissions paid to the salespeople that equal $10 for each tire the salesperson sells.

g. The cost of oil to lubricate the machines in the factory.

h. Salary of the factory supervisor which is $9,000 per month.

i. Salary of the president of the company which is $20,000 per month.

j. Money earned by the sales manager that equals $5 for each tire sold.

Homework Answers

Answer #1
          Product cost Period cost
DM DL MO AE SE
a Cost of the rubber that goes into tire XX
b Depreciation cost of $10,000 equiment used by top manage XX
c depreciation of machines used in factory XX
d depreciation of cars used by sales people XX
e cost of paying $15 per hour to workeers XX
f commissions paid to salespeople XX
g cost of oil to lubricate XX
h Salary of factory supervisor XX
i salary of president of the company XX
j money earned by sales manager XX
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