Question

PART 1) The following calendar year-end information is taken from the December 31, 2017, adjusted trial balance and other records of Leone Company

Advertising expense	$	34,000
Depreciation expense—Office equipment		10,000
Depreciation expense—Selling equipment		11,200
Depreciation expense—Factory equipment		36,550
Factory supervision		103,860
Factory supplies used		10,350
Factory utilities		37,800
Direct labor		726,000
Indirect labor		57,200
Miscellaneous production costs		8,650
Office salaries expense		65,750
Raw materials purchases*		935,000
Rent expense—Office space		24,400
Rent expense—Selling space		31,200
Rent expense—Factory building		76,800
Maintenance expense—Factory equipment		42,600
Sales		4,662,500
Sales salaries expense		396,560

*Assume that the raw materials inventory account is used only for direct materials. Indirect materials are recorded in a factory supplies account.

1. Classify each of the costs as either a product or period cost. Then, classify each of the product costs as either direct materials, direct labor, or factory overhead and each of the period costs as either selling or general and administrative expenses. (Leave no cell blank.)

Costs	Product Cost or Period Cost	Type of Product Cost	Type of Period
Advertising Expense
Depreciation Expense – Office Equipment
Depreciation Expense – Selling Equipment
Depreciation Expense – Factory Equipment
Factory Supervision
Factory Utilities
Direct Labor
Indirect Labor
Miscellaneous Production Costs
Office Salaries Expense
Raw Materials Expense
Rent Expense – Office Space
Rent Expense – Selling Space
Rent Expense – Factory Building
Maintenance Expense – Factory Equipment
Maintenance Expense – Factory Equipment
Sales
Sales Salaries Expense

Answer 1

Costs	Product Cost or Period Cost	Type of Product Cost	Type of Period
Advertising Expense	Period Cost		Selling Expense
Depreciation Expense – Office Equipment	Period Cost		General and Administrative expense
Depreciation Expense – Selling Equipment	Period Cost		Selling Expense
Depreciation Expense – Factory Equipment	Product Cost	Factory Overheads
Factory Supervision	Product Cost	Factory Overheads
Factory Utilities	Product Cost	Factory Overheads
Direct Labor	Product Cost	Direct labor
Indirect Labor	Product Cost	Factory Overheads
Miscellaneous Production Costs	Product Cost	Factory Overheads
Office Salaries Expense	Period Cost		General and Administrative expense
Raw Materials Expense	Product Cost	Direct material
Rent Expense – Office Space	Period Cost		General and Administrative expense
Rent Expense – Selling Space	Period Cost		Selling Expense
Rent Expense – Factory Building	Product Cost	Factory Overheads
Maintenance Expense – Factory Equipment	Product Cost	Factory Overheads
Maintenance Expense – Factory Equipment	Product Cost	Factory Overheads
Sales
Sales Salaries Expense	Period Cost		Selling Expense

Sales is not an expense but a revenue.

All factory overheads are product cost and all direct material and direct labor are product cost.

Every cost other than product cost is period cost.