Question

CLASSIFY THE FOLLOWING ACTIVITIES

JIM OWNS CAPE INC. THE COMPANY MANUFACTURES FLOW JETS AND SELLS THEM TO FIRE DEPARTMENTS AROUND THE COUNTRY.

DURING THE MONTH OF APRIL, JIM INCURRED THE FOLLOWING COSTS AND WANTS YOUR HELP CLASSIFYING THEM

ACTIVITY

1.	DEPRECIATION ON THE FACTORY
2	SECURITY GUARDS AROUND THE CORPORATE OFFICE
3	SALARY OF ASSEMBLY WORKERS
4	MATERIAL USED IN THE FLOW JETS
5	SECRETARY’S SALARIES
6	EQUIPMENT USED TO MAKE THE FLOW JETS
7	SALARY OF THE SHOP FOREMAN
8	JIM’S SALARY
9	SALES COMMISSIONS
10	UTILITIES COSTS ON THE FACTORY
11	RENT ON THE CORPORATE OFFICE
12	SALARY OF THE FACTORY MANAGER

	PRODUCT	DIRECT	INDIRECT	PERIOD	SG&A
1
2
3
4
5
6
7
8
9
10
11
12

Answer 1

Before answering we should have a cleared idea what each cos are meant by:

Direct Cost:Is the type of expense which can be traced back to one unit of production.ie,that can be completely attributed to the production of specific goods eg:Direct labour or Direct raw material

Indirect Cost:Is the type of expense which cannot be traced back to one unit of production. for eg:maintaining whole factory is important but cannot be calculated as per unit basis, salary of supervisor

Period Cost: Which are fixed to cost, would not change according to level of production. eg:Rent of factory.

	PRODUCT	DIRECT	INDIRECT	PERIOD	Selling, General and Administrative Expenses
1					DEPRECIATION ON THE FACTORY (It is an operating expense generally an administration expense)
2			SECURITY GUARDS AROUND THE CORPORATE OFFICE (Not directly involved in production but is mportant)
3		WAGE OF ASSEMBLY WORKERS ( They are directly involved in producton and can be traced back cost of labour per product.)
4		MATERIAL USED IN THE FLOW JETS. (direct Raw material are always direct cost)
5			SECRETARY’S SALARIES (No basis of per product for secretary's work)
6			EQUIPMENT USED TO MAKE THE FLOW JETS (Is a capital expenditure and is not directly tracable to unit)
7			SALARY OF THE SHOP FOREMAN (as mentioned abov in eg
8			Kim's Salary (he is not directly involved in production)
9					SALES COMMISSIONS (Is the expense incured for selling product)
10			UTILITIES COSTS ON THE FACTORY (Are same as equipments b
11				RENT ON THE CORPORATE OFFICE ( is particularly explaine above. Is a fixed expense wount change with increase or decrease in production)
12			Salary Of Factory Manager (because it is not caused by a particular product)