Chapter 2, Problem 2.7SE

Classify product costs and period costs (Learning Objective 4)

Classify each of Ford Motor Company’s costs as either product costs or period costs. Ford Motor Company is an automobile manufacturer headquartered in Detroit, Michigan.

1. a. Cost of chemical included in paint to inhibit rust
2. b. Life insurance for the CEO
3. c. Cost of electricity at the Lima Engine Plant in Ohio
4. d. Depreciation on the buildings at the Flat Rock Assembly Plant in Michigan
5. e. Cost of ad campaign and slogan called “By Design” to highlight the designs of Ford’s cars
6. f. Purchase of aluminum to be used in car wheels
7. g. Salaries of Ford engineers researching ways to reduce CO₂ emissions
8. h. Cost of new software to schedule production
9. i. Salaries of Ford Motor Company’s top executives