Prestige Ltd manufactures snowboards. Classify each of the cost items listed (i.

Question

Prestige Ltd manufactures snowboards. Classify each of the cost items listed (i. to vi.) below as an inventorize cost or a period cost. Electricity used to provide lighting in the plant assembling the snowboards. Transportation costs for shipping the Prestige line of products to a retail chain. Payment to Colin Reece Designs for design of the Armageddon board. Depreciation on the computer equipment used by the accountant. Payment to contract workers to help in the plant due to increased demand of snowboards during peak season. Depreciation on the computer equipment used for quality testing of the boards during the assembly process.

Explanation / Answer

Different between both the cost

Inventoriable Cost means that costs which are a necessary and integral part of producing the finished product.

Period Cost means specific time period cost rather than with a saleable product cost. These costs relate to non-manufacturing costs and therefore are not inventoriable costs.

For the above sum we can bifurcate between Inventoriable cost and period cost as follow

Type 1 Electricity used in lighting for plant
Assembling the Snownoard Inventoriable Cost 2 Transportation for shipping the product to
retail chain Inventoriable Cost 3 Payment to colin Recee for design of
Armagadon Board Period Cost 4 Depriciation for the computed used by Accountant Period Cost 5 Payment to contract worker for help in plant Due to increase in Demand of Snow board Inventoriable Cost 6 Depriciation for the computed Equipment used for quality testing of the board during assembly process Inventoriable Cost

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