Question

The following calendar year-end information is taken from the December 31, 2017, adjusted trial balance and other records of Leone Company.

Advertising expenses	\(28,750	Miscellaneous production costs	\)8,425
Depreciation expenses – office equipment	7,250	Office salaries expense	63,000
Depreciation expenses – selling equipment	8,600	Raw material purchases	925,000
Depreciation expenses – factory equipment	33,550	Rent expenses – office space	22,000
Factory supervision	102,600	Rent expenses – selling space	26,100
Factory supplies used	7,350	Rent expenses – factory building	76,800
Factory utilities	33,000	Maintenance expenses – factory equipment	35,400
Direct labor	675,480	Sales	4,462,500
Indirect labor	56,875	Sales salaries expenses	392,560

Required

1. Classify each cost as either a product or period cost.

2. Classify each product cost as either direct materials, direct labor, or factory overhead.

3. Classify each period cost as either selling expenses or general and administrative expenses.

Short answer

1. Product cost totals:$1,954,480.
2. Factory overhead totals$354,000.
3. Selling expenses total$456,010.

Step-by-step solution

Definition of Selling Expenses

The cost incurred by the business entity in respect of selling the product to the customer is known as selling expenses. It includes marketing expenses, distribution expenses, and the sales commission.

Classification of cost as either product or period cost

Particular	Amount	Classification
Advertising expenses	$28,750	Period cost
Depreciation expenses – office equipment	7,250	Period cost
Depreciation expenses – selling equipment	8,600	Period cost
Depreciation expenses – factory equipment	33,550	Product cost
Factory supervision	102,600	Product cost
Factory supplies used	7,350	Product cost
Factory utilities	33,000	Product cost
Direct labor	675,480	Product cost
Indirect labor	56,875	Product cost
Miscellaneous production costs	$8,425	Product cost
Office salaries expense	63,000	Period cost
Raw material purchases	925,000	Product cost
Rent expenses – office space	22,000	Period cost
Rent expenses – selling space	26,100	Period cost
Rent expenses – factory building	76,800	Product cost
Maintenance expenses – factory equipment	35,400	Product cost
Sales salaries expenses	392,560	Period cost

Classification of product costs as direct material or direct labor, or factory overhead

Particular	Amount	Classification
Depreciation expenses – factory equipment	33,550	Factory overhead
Factory supervision	102,600	Factory overhead
Factory supplies used	7,350	Factory overhead
Factory utilities	33,000	Factory overhead
Direct labor	675,480	Direct labor
Indirect labor	56,875	Factory overhead
Miscellaneous production costs	$8,425	Factory overhead
Raw material purchases	925,000	Direct material
Rent expenses – factory building	76,800	Factory overhead
Maintenance expenses – factory equipment	35,400	Factory overhead

Classification of each period cost as selling expenses or general and administration expenses

Particular	Amount	Classification
Advertising expenses	$28,750	Selling expenses
Depreciation expenses – office equipment	7,250	General and administration expenses
Depreciation expenses – selling equipment	8,600	Selling expenses
Office salaries expense	63,000	General and administration expenses
Rent expenses – office space	22,000	General and administration expenses
Rent expenses – selling space	26,100	Selling expenses
Sales salaries expenses	392,560	Selling expenses