Chapter 16: Q16-5SE-c (page 886)
Identifying product costs and period costs Classify each cost of a paper manufacturer as either a product cost or a period cost:
c. Cost of electricity at the paper mill
The cost of electricity at the paper mill will come under the product cost.
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Computing cost of goods manufactured
Use the following inventory data for Caddy Golf Company to compute the cost of goods manufactured for the year:
Direct Materials Used $ 12,000
Manufacturing Overhead 21,000
Work-in-Process Inventory:
Beginning Balance 1,000
Ending Balance 5,000
Direct Labor 9,000
Finished Goods Inventory:
Beginning Balance 18,000
Ending Balance 4,000
Explain the difference between a direct cost and an indirect cost.
Identifying product costs and period costs Classify each cost of a paper manufacturer as either a product cost or a period cost:
f. Cost of TV ads.
Question:Classifying period costs and product costs
Lawlor, Inc. is the manufacturer of lawn care equipment. The company incurs the following costs while manufacturing weed trimmers:
• Shaft and handle of weed trimmer
• Motor of weed trimmer
• Factory labor for workers assembling weed trimmers
• Nylon thread used by the weed trimmer (not traced to the product)
• Glue to hold the housing together
• Plant janitorial wages
• Depreciation on factory equipment
• Rent on plant
• Sales commissions
• Administrative salaries
• Plant utilities
• Shipping costs to deliver finished weed trimmers to customers
Requirements
1. Describe the difference between period costs and product costs.
2. Classify Lawlor’s costs as period costs or product costs. If the costs are product costs, further classify them as direct materials, direct labor, or manufacturing overhead.
Comparing managerial accounting and financial accounting
For each of the following, indicate whether the statement relates to managerial accounting (MA) or financial accounting (FA):
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