Chapter 1, Problem 1PA

The following is a list of costs that were incurred in the production and sale of large commercial airplanes:

1. a. Annual bonus paid to the chief operating officer of the company
2. b. Annual fee to a celebrity to promote the aircraft
3. c. Cost of electronic guidance system installed in the airplane cockpit
4. d. Cost of electrical wiring throughout the airplane
5. e. Cost of miniature replicas of the airplane used to promote and market the airplane
6. f. Cost of normal scrap from production of airplane body
7. g. Cost of paving the headquarters employee parking lot
8. h. Decals for cockpit door, the cost of which is immaterial to the cost of the final product
9. i. Depreciation on factory equipment
10. j. Hourly wages of employees that assemble the airplane
11. k. Hydraulic pumps used in the airplane’s flight control system
12. l. Instrument panel installed in the airplane cockpit
13. m. Interior trim material used throughout the airplane cabin
14. n. Masks for use by painters in painting the airplane body
15. o. Metal used for producing the airplane body
16. p. Oil to lubricate factory equipment
17. q. Power used by painting equipment
18. r. Prebuilt leather seats installed in the first-class cabin
19. s. Production Quality Control Department costs for the year
20. t. Salaries of Marketing Department personnel
21. u. Salaries of test pilots
22. v. Salary of chief financial officer
23. w. Salary of plant manager
24. x. Special advertising campaign in Aviation World magazine
25. y. Turbo-charged airplane engine
26. z. Yearly cost of the maintenance contract for robotic equipment

Instructions

Classify each cost as either a product cost or a period cost. Indicate whether each product 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: