Chapter 1, Problem 2PB

Classifying costs

The following is a list of costs incurred by several businesses:

• A. Salary of quality control supervisor
• B. Packing supplies for products sold. These supplies are a very small portion of the total cost of the product.
• C. Factory operating supplies
• D. Depreciation of factory equipment
• E. Hourly wages of warehouse laborers
• F. Wages of company controller's secretary
• G. Maintenance and repair costs for factory equipment
• H. Paper used by commercial printer
• I. Entertainment expenses for sales representatives
• J. Protective glasses for factory machine operators
• K. Sales commissions
• L. Cost of hogs for meat processor
• M. Cost of telephone operators for a toll-free hotline to help customers operate products
• N. Hard drives for a microcomputer manufacturer
• O. Lumber used by furniture manufacturer
• P. Wages of a machine operator on the production line
• Q. First aid supplies for factory workers
• R. Tires for an automobile manufacturer
• S. Paper used by Computer Department in processing various managerial reports
• T. Seed for grain farmer
• U. Health insurance premiums paid for factory workers
• V. Costs of operating a research laboratory
• W. Costs for television advertisement
• X. Executive bonus for vice president of marketing

Instructions

Classify each of the preceding costs as a product cost or 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 preparing your answer. Place an “X” in the appropriate column.

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