Question

The following calendar year-end information is taken from the December 31, 2017, adjusted trial balance and other records of Leone Company.

Advertising expense	$	28,750
Depreciation expense—Office equipment		7,250
Depreciation expense—Selling equipment		8,600
Depreciation expense—Factory equipment		33,550
Factory supervision		102,600
Factory supplies used		7,350
Factory utilities		33,000
Direct labor		675,480
Indirect labor		56,875
Miscellaneous production costs		8,425
Office salaries expense		63,000
Raw materials purchases*		925,000
Rent expense—Office space		22,000
Rent expense—Selling space		26,100
Rent expense—Factory building		76,800
Maintenance expense—Factory equipment		35,400
Sales		4,462,500
Sales salaries expense		392,560

*Assume that the raw materials inventory account is used only for direct materials. Indirect materials are recorded in a factory supplies account.

Required:
Classify each of the costs as either a product or period cost. Then, classify each of the product costs as either direct materials, direct labor, or factory overhead and each of the period costs as either selling or general and administrative expenses. (Leave no cell blank.)

	Costs	Product Cost or Period Cost	Type of Product Cost	Type of Period Cost
1.	Advertising expense
2.	Depreciation expense—Office equipment
3.	Depreciation expense—Selling equipment
4.	Depreciation expense—Factory equipment
5.	Factory supervision
6.	Factory supplies used
7.	Factory utilities
8.	Direct labor
9.	Indirect labor
10.	Miscellaneous production costs
11.	Office salaries expense
12.	Raw materials purchases
13.	Rent expense—Office space
14.	Rent expense—Selling space
15.	Rent expense—Factory building
16.	Maintenance expense—Factory equipment
17.	Sales
18.	Sales salaries expense

Answer 1

		Product cost	period cost
1	period		selling
2	period		general and administrative expenses
3	period		selling
4	product	Factoryoverhead
5	product	Factoryoverhead
6	product	Factoryoverhead
7	product	Factoryoverhead
8	product	Direct labor
9	product	Factoryoverhead
10	product	Factoryoverhead
11	period		general and administrative expenses
12	product	Direct material
13	period		general and administrative expenses
14	period		selling
15	product	Factory overhead
16	product	Factory overhead
17	product	sales
18	period		selling

***period cost is a cost that is charged to income statement in the year in which it is incurred

***product cost is a cost that is added to cost of product