Question

Loring Company incurred the following costs last year:

Costs	Amounts
Direct materials	$211,000
Factory rent	20,000
Direct labor	125,000
Factory utilities	6,800
Supervision in the factory	47,000
Indirect labor in the factory	34,000
Depreciation on factory equipment	7,900
Sales commissions	29,000
Sales salaries	70,000
Advertising	34,000
Depreciation on the headquarters building	9,400
Salary of the corporate receptionist	27,000
Other administrative costs	160,000
Salary of the factory receptionist	26,000

	Required:
1.	Classify each of the costs using the table provided. Be sure to total the amounts in each column.
2.	What was the total product cost for last year?
3.	What was the total period cost for last year?
4.	If 30,000 units were produced last year, what was the unit product cost?

X

Cost Classification

1. Classify each of the costs using the table provided. Be sure to total the amounts in each column. If an amount box does not require an entry, leave it blank. Direct materials is shown as an example.

Loring Company

1	Costs	Product Cost: Direct Materials	Product Cost: Direct Labor	Product Cost: Manufacturing Overhead	Period Cost: Selling Expense	Period Cost: Administrative Expense
2	Direct materials	$211,000.00
3	Factory rent
4	Direct labor
5	Factory utilities
6	Supervision in the factory
7	Indirect labor in the factory
8	Depreciation on factory equipment
9	Sales commissions
10	Sales salaries
11	Advertising
12	Depreciation on the headquarters building
13	Salary of the corporate receptionist
14	Other administrative costs
15	Salary of the factory receptionist
16	Total

X

Product Costs

2. What was the total product cost for last year?

The total product cost is .

3. What was the total period cost for last year?

The total unit product cost is .

The total period cost is .

4. If 30,000 units were produced last year, what was the unit product cost? Round your answer to two decimal places.

Answer 1

Answer with explanation:

1.

Explanation:

Direct materials are the materials used directly for production. Direct labor is the labor charges directly related with production. Factory rent, Factory utilities, Supervision in the factory, Indirect labor in the factory, Depreciation on factory equipment and Salary of the factory receptionist are the expenses which are indirectly related with manufacturing activities. Hence,they are considered as manufacturing overhead. All these costs, such as direct materials, direct labor and manufacturing overhead are together called as Product Costs.

Sales commissions, Sales salaries and Advertising are expenses forming part of Selling expenses.

Depreciation on the headquarters building, Salary of the corporate receptionist and Other administrative costs are expenses forming part of Administrative expenses. All these expenses such as, Selling expenses and Administrative expenses are together called as Period Costs.

2. Total product cost for last year was $477,700.

Explanation:

Total product cost = Total Direct Materials Cost + Total Direct labor Costs + Total Manufacturing overhead Costs

= $211,000 + $125,000 + $141,700 = $477,700

3. Total period cost for last year was $329,400.

Explanation:

Total period cost = Total Selling Expense + Total Administrative Expense

= $133,000 + $196,400 = $329,400

4. If 30,000 units were produced last year, the unit product cost will be $15.92 per unit.

Explanation:

Unit product cost = Total product cost / Number of units produced

Total product cost = $477,700

Number of units produced = 30,000

Unit product cost = $477,700 / 30,000 = $15.92 per unit.