Suppose that you have been given a summer job as an intern at Issac Aircams, a company that manufacturessophisticated spy cameras for remote-controlled military reconnaissance aircraft. The company, which isprivately owned, has approached a bank for a loan to help it finance its growth. The bank requires financialstatements before approving such a loan. You have been asked to help prepare the financial statements andwere given the following list of costs:1. Depreciation on salespersons’ cars.2. Rent on equipment used in the factory.3. Lubricants used for machine maintenance.4. Salaries of personnel who work in the finished goods warehouse.5. Soap and paper towels used by factory workers at the end of a shift.6. Factory supervisors’ salaries.7. Heat, water, and power consumed in the factory.8. Materials used for boxing products for shipment overseas. (Units are not normally boxed.)9. Advertising costs.10. Workers’ compensation insurance for factory employees.11. Depreciation on chairs and tables in the factory lunchroom.12. The wages of the receptionist in the administrative offices.13. Cost of leasing the corporate jet used by the company’s executives.14. The cost of renting rooms at a Florida resort for the annual sales conference.15. The cost of packaging the company’s product.Required:Classify the above costs as either product costs or period costs for the purpose of preparing the financialstatements for the bank.
Suppose that you have been given a summer job as an intern at Issac Aircams, a company that manufactures
sophisticated spy cameras for remote-controlled military reconnaissance aircraft. The company, which is
privately owned, has approached a bank for a loan to help it finance its growth. The bank requires financial
statements before approving such a loan. You have been asked to help prepare the financial statements and
were given the following list of costs:
1.
2. Rent on equipment used in the factory.
3. Lubricants used for machine maintenance.
4. Salaries of personnel who work in the finished goods warehouse.
5. Soap and paper towels used by factory workers at the end of a shift.
6. Factory supervisors’ salaries.
7. Heat, water, and power consumed in the factory.
8. Materials used for boxing products for shipment overseas. (Units are not normally boxed.)
9. Advertising costs.
10. Workers’ compensation insurance for factory employees.
11. Depreciation on chairs and tables in the factory lunchroom.
12. The wages of the receptionist in the administrative offices.
13. Cost of leasing the corporate jet used by the company’s executives.
14. The cost of renting rooms at a Florida resort for the annual sales conference.
15. The cost of packaging the company’s product.
Required:
Classify the above costs as either product costs or period costs for the purpose of preparing the financial
statements for the bank.
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