Chapter 19, Problem 3E

To determine

Direct Materials: Direct materials are the materials which are converted into finished products or goods. These materials themselves become the finished good when the production is completed. All types of raw materials come under direct materials.

Direct Labor: Direct labor is a labor who is directly involved in the production of finished goods. The cost of direct labor is considered as direct cost of production.

Manufacturing Overhead: The cost which is directly related with production process of finished goods is called as manufacturing overhead. It does not include any of the selling and office expenses.

Period Cost: The cost which is incurred at the time of selling, handling and governing a product is called as period cost. It includes shipping cost, selling expenses and office expenses. It is shown in income statement.

To indicate: (a) Classification of given costs and (b) the difference in accounting for product costs and period costs.