5. For each item shown below, classify it as a product cost or a period cost, by

Question

5.

For each item shown below, classify it as a product cost or a period cost, by placing an X in the appropriate column. For each item that is a product cost, also indicate whether it is a direct cost or an indirect cost with respect to a unit of finished product. Hint: Direct or indirect costs will not apply to items that you have classified as period cost, as period cost are not associated with producing the company’s finished products. I have completed the first item for you. (4 points)

Product or period cost?

Direct or indirect cost?

Cost item

Product

Period

Direct

Indirect

Administrative salaries

          X

Direct labor

Advertising

Property tax on the factory

Factory maintenance

Direct materials

Depreciation on factory equipment

Interest expense

Factory supplies

5.

For each item shown below, classify it as a product cost or a period cost, by placing an X in the appropriate column. For each item that is a product cost, also indicate whether it is a direct cost or an indirect cost with respect to a unit of finished product. Hint: Direct or indirect costs will not apply to items that you have classified as period cost, as period cost are not associated with producing the company’s finished products. I have completed the first item for you. (4 points)

Product or period cost?

Direct or indirect cost?

Cost item

Product

Period

Direct

Indirect

Administrative salaries

          X

Direct labor

Advertising

Property tax on the factory

Factory maintenance

Direct materials

Depreciation on factory equipment

Interest expense

Factory supplies

Explanation / Answer

PRODUCT OR PERIOD DIRECT OR INDIRECT PRODUCT OR PERIOD PERIOD DIRECT   INDIRECT Administrative salaries X X Direct labour X X Advertisement X X Property tax on factory X X factory maintenance X X Direct Material X X Depreciation on Factory Equipment X X Interest expense X X Factory supplies X X

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