Chapter 1, Problem 1PA

Classifying costs

The following is a list of costs (hai were incurred in (he production and sale of large commercial airplanes:

• A. Salary of chief compliance officer of company
• B. Power used by painting equipment
• C. Instrument panel installed in the airplane cockpit
• D. Annual bonus paid to the chief operating officer of the company
• E. Turbo-charged airplane engine
• F. Interior trim material used throughout the airplane cabin
• G. Cost of normal scrap from production of airplane body
• H. Hourly wages of employees that assemble the airplane
• I. Salary of the Marketing Department personnel
• J. Cost of paving the headquarters employee parking lot
• K. Cost of electrical wiring throughout the airplane
• L. Cost of electronic guidance system installed in the airplane cockpit
• M. Salary of plant manager
• N. Cost of miniature replicas of the airplane used to promote and market the airplane
• O. Human Resources Department costs for the year
• P. Metal used for producing the airplane body
• Q. Annual fee to a celebrity to promote the aircraft
• R. Hydraulic pumps used in the airplane's flight control system
• S. Yearly cost of the maintenance contract for robotic equipment
• T. Prebuilt leather seats installed in the first-class cabin
• U. Depreciation on factory equipment
• V. Special advertising campaign in Aviation World magazine
• W. Oil to lubricate factory equipment
• X. Masks for use by painters in painting the airplane body
• Y. Decals for cockpit door, the cost of which is immaterial to the cost of the final product Z. Salary of chief financial officer

Instructions

Classify each cost as either a product cost or a period cost. Indicato whether each produci cost is a direct materials cost, a direct labor cost, or a factory overhead cost. Indicate whether each period cost is a selling expense or an administrative expense. Use the following tabular headings for your answer, placing an “X" in the appropriate column:

	Product Costs			Period Costs
Cost	Direct Materials6 Cost	Direct Labor Cost	Factory Overhead Cost	Selling Expense	Administrative Expense