Question

Question 1 10 MARKS Ashland Company, a maker of kitchen cabinets, incurred the following costs during the current year: Required: Classify each cost as either a product or period cost. Product Period 1.. Depreciation on automobiles used sales staff. 2. Salary of Ashland's chief executive officer 3. Glue used in the production process 4. Supplies for factory washroom 5. Research and development costs 6. Property taxes on factory building 7. Salary of company controller 8. Depreciation on furniture in factory lunchroom 9. Cost of lubricating machinery 10. Wood used in production process

Answer 1

Product costs are the costs which are incurred in the production of the goods. Period costs are costs other than product costs like administrative expenses and selling expenses.

1. Depreciation on automobiles used sales staff = Period cost

2. Salary of Ashland's chief executive officer = Period cost

3. Glue used in the production process = Product cost

4. Supplies for factory washroom = Product cost

5. Research and development costs = Period cost

6. Property taxes on factory building = Period cost

7. Salary of company controller = Period cost

8. Depreciation on furniture in factory lunchroom = Product cost

9. Cost of lubricating machinery = Product cost

10. Wood used in production process = Product cost