Chapter 18, Problem 6E

To determine

Direct cost is the cost which can be directly attributed to the production of specific goods or services.

Indirect cost is the cost which cannot be directly attributed to the production of specific goods or services such as administrative expenses.

Product costs are generally direct material, direct labor, direct expenses and factory overheads used in manufacturing of products.

Period costs are incurred over a period of time. These are not necessary part of production process. The period cost is reporting as an expense during the accounting period such as interest expenses.

Direct material and direct labor costs are known as Prime cost whereas conversion cost is the cost which is incurred to convert direct material into products.

To determine:

In the question we have given expenses which we have to classify as per below categories:

1. Product cost or period cost

If product cost then as direct material, direct labor or factory overheads and then further to be categorized into prime cost or conversion cost

2. Further to be classified product cost as direct cost or indirect cost.