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The following is a list of costs incurred by several businessorganizations: (a)

ID: 2433861 • Letter: T

Question

The following is a list of costs incurred by several businessorganizations:

(a)   Telephone cable for a telephone company.
(b)   Subscription to a health club forexecutives.
(c)   Salary of the Director of InternalAuditing.
(d)   Long-distance telephone bill for calls madeby salespersons.
(e)   Carrying cases for a manufacturer of videocamcorders.
(f)   Cotton for a textile manufacturer of bluejeans.
(g)   Bandages for the emergency room of ahospital.
(h)   Cost of company holiday party.
(i)   Electricity used to operate factorymachinery.
(j)   State unemployment compensation taxes forfactory workers.

Classify each of the preceding costs as product costs or periodcosts. For those costs classified as product costs, indicatewhether the product cost is a direct materials cost, direct laborcost, or factory overhead cost. For those costs classified asperiod costs, indicate whether the period cost is a selling expenseor an administrative expense.

Explanation / Answer

Product Cost

Period Cost

DM Cost

Administrative expense

Administrative expense

Selling expense

DM Cost

DM Cost

OH Cost

Administrative expense

Factory OH

Factory OH

Product Cost

Period Cost

Telephone cable for a telephonecompany

DM Cost

Subscription to a healthclub for executives

Administrative expense

Salary of the Director of InternalAuditing

Administrative expense

Long-distance telephone bill for callsmade by salespersons

Selling expense

Carrying cases for a manufacturer of videocamcorders

DM Cost

Cotton for a textile manufacturer of bluejeans

DM Cost

Bandages for the emergency room of ahospital

OH Cost

Cost of company holiday party

Administrative expense

Electricity used to operate factorymachinery

Factory OH

State unemployment compensation taxes forfactory workers

Factory OH