Chapter 19, Problem 2PSA

To determine

Period Cost: The cost incurred after the production is sold is called period cost. It includes shipping, selling and office expenses.

Product Cost: Product cost is the total quantitative value of all the efforts and resources employed in for production. It includes all types of materials and human efforts used by a business.

Direct Materials: At the time of manufacturing, material which is directly related to the finished goods is known as direct material.

Direct Labor: The amount paid to the labors, directly associated with the process of conversion of the raw material into finished goods, is known as direct labor.

Manufacturing Overheads: The cost which is indirectly related to the production is known as manufacturing overheads.

To identify: (a) the total direct material cost, direct labor cost and manufacturing overhead, (b) The cost to produce one audio system.