Distinguish between product costs and period costs.

Question

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Answer 1

Textbook Question

Chapter 2, Problem 1RQ

Distinguish between product costs and period costs.

Expert Solution & Answer

To determine

Explain the difference between product cost and period cost.

Explanation of Solution

Product costs: The costs incurred to acquire the merchandise, ship the stock, prepare the merchandise for sale, and store the inventory are collectively referred to as product costs or inventory costs. Purchase price of merchandise, transportation costs, conversion costs, storage costs are some examples of product costs.

Period costs: These costs are not related to inventory; hence, they are not added to inventory costs. These costs are ascribed to the period in which they are incurred, hence, referred to as period costs. Selling expenses, administrative expenses, and incidental expenses like interest expense, and income tax expense are the examples of period costs.

The difference between product cost and period cost.

Product Cost

Period Cost

The product cost is a cost that is related to the manufacturing of goods or merchandise until the sale of goods.

Period cost is identified with the period of time in which they are incurred rather than with units of purchased or produced goods.

Period costs are recognized as expenses during the time period in which they are incurred.

Table (1)

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Cullumber Company uses a job-order cost system in each of its three manufacturing departments. Manufacturing overhead is applied to jobs on the basis of direct labour cost in Department D, direct labour hours in Department E, and machine hours in Department K. In establishing the predetermined overhead rates for 2022, the following estimates were made for the year. Department D E K Manufacturing overhead $1,280,000 $1,500,000 $840,000 Direct labour costs $1,600,000 $1,312,500 $472,500 Direct labour hours 105,000 125,000 42,000 Machine hours 420,000 525,000 120,000 The following information pertains to January 2022 for each manufacturing department. Department D E K Direct materials used Direct labour costs $147,000 $132,300 $81,900 $126,000 $115,500 $39,375 Manufacturing overhead incurred $103,950 $128,600 $73,950 Direct labour hours 8,400 11,550 3,675 Machine hours 35,700 47,250 10,380 Your answer is partially correct. Calculate the predetermined overhead rate for each department.…

Answer 2

Textbook Question

Chapter 2, Problem 1RQ

Distinguish between product costs and period costs.

Expert Solution & Answer

To determine

Explain the difference between product cost and period cost.

Explanation of Solution

Product costs: The costs incurred to acquire the merchandise, ship the stock, prepare the merchandise for sale, and store the inventory are collectively referred to as product costs or inventory costs. Purchase price of merchandise, transportation costs, conversion costs, storage costs are some examples of product costs.

Period costs: These costs are not related to inventory; hence, they are not added to inventory costs. These costs are ascribed to the period in which they are incurred, hence, referred to as period costs. Selling expenses, administrative expenses, and incidental expenses like interest expense, and income tax expense are the examples of period costs.

The difference between product cost and period cost.

Product Cost

Period Cost

The product cost is a cost that is related to the manufacturing of goods or merchandise until the sale of goods.

Period cost is identified with the period of time in which they are incurred rather than with units of purchased or produced goods.

Period costs are recognized as expenses during the time period in which they are incurred.

Table (1)

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Answer 3

Textbook Question

Chapter 2, Problem 1RQ

Distinguish between product costs and period costs.

Expert Solution & Answer

To determine

Explain the difference between product cost and period cost.

Explanation of Solution

Product costs: The costs incurred to acquire the merchandise, ship the stock, prepare the merchandise for sale, and store the inventory are collectively referred to as product costs or inventory costs. Purchase price of merchandise, transportation costs, conversion costs, storage costs are some examples of product costs.

Period costs: These costs are not related to inventory; hence, they are not added to inventory costs. These costs are ascribed to the period in which they are incurred, hence, referred to as period costs. Selling expenses, administrative expenses, and incidental expenses like interest expense, and income tax expense are the examples of period costs.

The difference between product cost and period cost.

Product Cost

Period Cost

The product cost is a cost that is related to the manufacturing of goods or merchandise until the sale of goods.

Period cost is identified with the period of time in which they are incurred rather than with units of purchased or produced goods.

Period costs are recognized as expenses during the time period in which they are incurred.

Table (1)

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Answer 4

Textbook Question

Chapter 2, Problem 1RQ

Distinguish between product costs and period costs.

Expert Solution & Answer

To determine

Explain the difference between product cost and period cost.

Explanation of Solution

Product costs: The costs incurred to acquire the merchandise, ship the stock, prepare the merchandise for sale, and store the inventory are collectively referred to as product costs or inventory costs. Purchase price of merchandise, transportation costs, conversion costs, storage costs are some examples of product costs.

Period costs: These costs are not related to inventory; hence, they are not added to inventory costs. These costs are ascribed to the period in which they are incurred, hence, referred to as period costs. Selling expenses, administrative expenses, and incidental expenses like interest expense, and income tax expense are the examples of period costs.

The difference between product cost and period cost.

Product Cost

Period Cost

The product cost is a cost that is related to the manufacturing of goods or merchandise until the sale of goods.

Period cost is identified with the period of time in which they are incurred rather than with units of purchased or produced goods.

Period costs are recognized as expenses during the time period in which they are incurred.

Table (1)

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Answer 5

Textbook Question

Answer 6

Textbook Question

Answer 7

Expert Solution & Answer

To determine

Explain the difference between product cost and period cost.

Explanation of Solution

Product costs: The costs incurred to acquire the merchandise, ship the stock, prepare the merchandise for sale, and store the inventory are collectively referred to as product costs or inventory costs. Purchase price of merchandise, transportation costs, conversion costs, storage costs are some examples of product costs.

Period costs: These costs are not related to inventory; hence, they are not added to inventory costs. These costs are ascribed to the period in which they are incurred, hence, referred to as period costs. Selling expenses, administrative expenses, and incidental expenses like interest expense, and income tax expense are the examples of period costs.

The difference between product cost and period cost.

Product Cost

Period Cost

The product cost is a cost that is related to the manufacturing of goods or merchandise until the sale of goods.

Period cost is identified with the period of time in which they are incurred rather than with units of purchased or produced goods.

Period costs are recognized as expenses during the time period in which they are incurred.

Table (1)

Answer 8

Expert Solution & Answer

To determine

Explain the difference between product cost and period cost.

Explanation of Solution

Product costs: The costs incurred to acquire the merchandise, ship the stock, prepare the merchandise for sale, and store the inventory are collectively referred to as product costs or inventory costs. Purchase price of merchandise, transportation costs, conversion costs, storage costs are some examples of product costs.

Period costs: These costs are not related to inventory; hence, they are not added to inventory costs. These costs are ascribed to the period in which they are incurred, hence, referred to as period costs. Selling expenses, administrative expenses, and incidental expenses like interest expense, and income tax expense are the examples of period costs.

The difference between product cost and period cost.

Product Cost

Period Cost

The product cost is a cost that is related to the manufacturing of goods or merchandise until the sale of goods.

Period cost is identified with the period of time in which they are incurred rather than with units of purchased or produced goods.

Period costs are recognized as expenses during the time period in which they are incurred.

Table (1)

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

To determine

Explain the difference between product cost and period cost.

Answer 12

Explanation of Solution

Product costs: The costs incurred to acquire the merchandise, ship the stock, prepare the merchandise for sale, and store the inventory are collectively referred to as product costs or inventory costs. Purchase price of merchandise, transportation costs, conversion costs, storage costs are some examples of product costs.

Period costs: These costs are not related to inventory; hence, they are not added to inventory costs. These costs are ascribed to the period in which they are incurred, hence, referred to as period costs. Selling expenses, administrative expenses, and incidental expenses like interest expense, and income tax expense are the examples of period costs.

The difference between product cost and period cost.

Product Cost

Period Cost

The product cost is a cost that is related to the manufacturing of goods or merchandise until the sale of goods.

Period cost is identified with the period of time in which they are incurred rather than with units of purchased or produced goods.

Period costs are recognized as expenses during the time period in which they are incurred.

Table (1)