Question

Exercise 14-05 Gala Company is a manufacturer of laptop computers. Various costs and expenses associated with its operations are as follows. The company intends to classify these costs and expenses into the following categories: (a) direct materials, (b) direct labor, (c) manufacturing overhead, and (d) period costs. For each item, indicate the cost category to which it belongs. Item Category 1. Property taxes on the factory building. 2. Production superintendents’ salaries. 3. Memory boards and chips used in assembling computers. 4. Depreciation on the factory equipment. 5. Salaries for assembly-line quality control inspectors. 6. Sales commissions paid to sell laptop computers. 7. Electrical components used in assembling computers. 8. Wages of workers assembling laptop computers. 9. Soldering materials used on factory assembly lines. 10. Salaries for the night security guards for the factory building.

Answer 1

Answer:

The classification is as follows

Explanation:

As we know that

The direct material and the direct labor are the direct labor cost which is related to the production process

While the manufacturing overhead is the indirect cost which is not indirectly related to the production process of the product

And, the period cost is the cost which covers the major part of the selling and administrative cost of the income statement

So, based on this, the classification is as follows

1. Property taxes on the factory building = Manufacturing Overhead

2. Production superintendents’ salaries = Manufacturing Overhead

3. Memory boards and chips used in assembling computers = Direct Materials

4 Depreciation on the factory equipment = Manufacturing Overhead

5 Salaries for assembly-line quality control inspectors = Direct Labor

6 Sales commissions paid to sell personal computers = Period Costs

7 Electrical components used in assembling computers =Direct Materials

8 Wages of workers assembling personal computers. = Direct Labor

9 Soldering materials used on factory assembly lines. = Manufacturing Overhead

10 Salaries for the night security guards for the factory building. = Manufacturing Overhead