Question

The following is a list of costs that were incurred in producing a textbook. Please indicate whether

    each cost is:

    (a) a product or period cost, and

    (b) if it is a product cost, whether it is a direct material, direct labor, or factory overhead cost.

1. Insurance on the factory building and equipment
2. Salary of the vice president of finance
3. Hourly wages of printing press operators during production
4. Straight-line depreciation on the printing presses used to manufacture the textbook
5. Straight-line depreciation on the office building
6. Electricity used to run the presses during the printing of the textbook
7. Sales commissions paid to textbook representatives for each textbook sold
8. Paper on which the textbook is printed
9. Book covers used to bind the pages
10. Salaries of staff used to develop artwork for the textbook
11. The glue used to bind pages to cover
12. Salary of quality control supervisor who inspects each textbook before it is shipped
13. Plant manager’s salary
14. Maintenance supplies
15. Property taxes on the headquarters building
16. Factory supervisors’ salaries
17. Travel costs of marketing executives to an annual sales meeting
18. Supplies used by the Accounting Department in preparing various managerial reports
19. Fees paid to lawn service for office grounds upkeep
20. Cost for marketing at a national conference
21. Attorney fees for drafting a new lease for headquarters offices
22. License fees for use of the patent for the printing press, based on number of textbooks produce

Answer 1

a) Product cost - Factory overhead cost

b) Period cost

c) Product cost - direct labour

d) Product cost - Factory overhead cost

e) Period cost

f) Product cost - Factory overhead cost

g) Period cost

h) Product cost- Direct material

i) Product cost- Direct Material

j) Product cost - Manufacturing overheads cost

k) Product cost- Direct material

l) Period costs

m) Product cost- Factory overhead cost

n) Product cost - factory overhead cost

o) Period costs

p) Product cost- Factory overhead cost

q) Period costs

r) Period cost

s) Period costs

t) Period costs

u) Period costs

v) Period cost