Question

Classify each of the following costs as a period cost or a product cost. If you classify the cost as a product cost, further classify it as direct material (DM), direct labor (DL), or manufacturing overhead (MOH). (If the cost is a period cost, leave t classification box empty: do not select a label.)
Period cost If product cost
or product cost DM, DL or MOH
a1. Property taxes-30% of building is used for sales, marketing, and administrative offices
a2. Property taxes-70% of building is used for manufacturing
b. Wages and benefits paid to assembly-line workers in the manufacturing plant
c. Depreciation on automated production equipment
d. Salaries paid to quality control inspectors in the plant
e. Repairs and maintenance on factory equipment
f. Standard packaging materials used to package individual units of product for sale (for example, cereal boxes in which cereal is packaged) g. Lease payment on administrative headquarters
h. Telecommunications costs for the customer service cal center

Answer 1

Answer:

Classification of costs as period cost or product cost

a1. Property taxes is 30% period cost

a2. Property taxes is 70% product cost (MOH)

b. Wages and benefits to factory workers = product cost (DL)

c. Depreciation on production equipment = product cost (MOH)

d. Salaries to quality control inspectors in the plant = product cost (MOH)

e. Repairs and maintenance on factory equipment = product cost (MOH)

f. Standard packaging materials = product cost (MOH)

g. Lease payment on administrative headquarters = period cost

h. Telecommunication costs for customer service = period cost

Explanation:

Period costs are fixed costs incurred that relate more to the period in which they are incurred than to the product.  They are not directly related to the product and are treated as expenses.  Product costs, on the other hand, are costs incurred in producing the product.  They may be in the form of direct materials, direct labor, or manufacturing overhead costs.