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Costing Concept

This document provides examples and questions to test understanding of classifying costs as product costs, period costs, direct materials, direct labor, manufacturing overhead, and variable or fixed costs. It gives examples of costs from various manufacturing and service companies and asks the reader to identify what type of cost each is. The answers provided classify costs such as machine lubricant and factory utilities as manufacturing overhead costs that are variable, and costs like the plant supervisor's salary and factory building depreciation as manufacturing overhead costs that are fixed.

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Owen Hudson
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1K views2 pages

Costing Concept

This document provides examples and questions to test understanding of classifying costs as product costs, period costs, direct materials, direct labor, manufacturing overhead, and variable or fixed costs. It gives examples of costs from various manufacturing and service companies and asks the reader to identify what type of cost each is. The answers provided classify costs such as machine lubricant and factory utilities as manufacturing overhead costs that are variable, and costs like the plant supervisor's salary and factory building depreciation as manufacturing overhead costs that are fixed.

Uploaded by

Owen Hudson
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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TBS901 Managerial Accounting and Costs Concepts

TBS801 Costing Concepts


Tutorial Review Questions Solutions
1. Indicate whether each of the following is a product or a period cost
(a) Electricity for lighting a factory building (Product)
(b) Costs of delivering finished bicycles to dealers (Period)
(c) Cost of a store detective in a retail establishment. (Period)
(d) Cost of eggs in a bakery. (Product)
(e) Cost of chocolate to a candy manufacturer. (Product)
(f) Salary of machine operator in a plastics factory. (Product)
(g) Salary of a sewing machine operator in a clothing factory. (Product)
(h) Depreciation of a freezer in an ice cream plant. (Product)
2. Eastside Manufacturing produces small electric engines. Identify the following costs as direct materials
(DM), direct labor (DL), manufacturing overhead (MOH), or a period cost (PC). Also indicate whether the
cost is variable (V) or fixed (F) with respect to behavior.
A.
B.
C.
D.
E.
F.
G.
H.
I.

Commissions paid to salespeople PC, V


Straight-line depreciation on the factory building MOH, F
Salary of the plant supervisor MOH, F
Wages of the assembly-line workers DL, V
Machine lubricant used in production activities MOH, V
Engine casings used in production activities DM, V
Advertising placed in trade journals PC, F
Lease payments for the president's automobile PC, F
Property taxes paid on the factory facilities MOH, F

3. The following selected costs were extracted from the accounting records of Los Angeles Machining (LAM):
1.
2.
3.
4.
5.
6.
7.
8.
9.

Direct materials used in production


Wages of machine operators
Factory utilities
Sales commissions
Salary of LAM's president
Factory depreciation
Wages of plant security guards
Uncollectible accounts expense
Machine lubricant used in production

Required: By the use of numbers, identify the costs that would be used to calculate:
A.
B.
C.
D.

Cost of goods manufactured. 1, 2, 3, 6, 7, 9


Manufacturing overhead. 3, 6, 7, 9
Total period costs. 4, 5, 8
Total conversion costs. 2, 3, 6, 7, 9

4. Consider the following items:


A. Tomatoes used in the manufacture of Heinz ketchup
B. Administrative salaries of executives employed by Southwest Airlines
C. Wages of assembly-line workers at a Ford plant
D. Marketing expenditures of the Los Angeles Dodgers baseball club

E.
F.
G.
H.
I.

Commissions paid to Coca-Cola's salespeople


Straight-line depreciation on manufacturing equipment owned by Dell Computer
Shipping charges incurred by Office Depot on out-going orders
Speakers used in Sony home-theater systems
Insurance costs related to a Mary Kay Cosmetics' manufacturing plant

Required: Complete the table that follows and classify each of the costs listed as (1) a product or period
cost and (2) a variable or fixed cost by placing an "X" in the appropriate column.

Item
A
B
C
D
E
F
G
H
I

Product or Period Cost


Product
Period
X
X
X
X
X
X
X
X
X

Variable or Fixed Cost


Variable
Fixed
X
X
X
X
X
X
X
X
X

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