Question

The following is a list of costs that were incurred in producing a textbook. Please indicate whether

each cost is: (a) a product or period cost, and

(b) if it is a product cost, whether it is a direct material, direct labor, or factory overhead cost.

1. (a) Insurance on the factory building and equipment
2. (b) Salary of the vice president of finance
3. (c) Hourly wages of printing press operators during production
4. (d) Straight-line depreciation on the printing presses used to manufacture the textbook
5. (e) Straight-line depreciation on the office building
6. (f) Electricity used to run the presses during the printing of the textbook
7. (g) Sales commissions paid to textbook representatives for each textbook sold
8. (h) Paper on which the textbook is printed
9. (i) Book covers used to bind the pages
10. (j) Salaries of staff used to develop artwork for the textbook
11. (k) Glue used to bind pages to cover
12. (l) Salary of quality control supervisor who inspects each textbook before it is shipped
13. (m) Plant manager’s salary
14. (n) Maintenance supplies
15. (o) Property taxes on the headquarters building
16. (p) Factory supervisors’ salaries
17. (q) Travel costs of marketing executives to annual sales meeting
18. (r) Supplies used by the Accounting Department in preparing various managerial reports
19. (s) Fees paid to lawn service for office grounds upkeep
20. (t) Cost for marketing at a national conference
21. (u) Attorney fees for drafting a new lease for headquarters offices
22. (v) License fees for use of patent for printing press, based on number of textbooks produced

Answer 1

	Product Cost/ Period Cost	Product Cost
		Direct Material	Direct Labor	Factory Overhead
a. Insurance on the factory building and equipment	Product cost			X
b. Salary of the vice president of finance	Period cost
c. Hourly wages of printing press operators during production	Product cost		X
d. Straight-line depreciation on the printing presses used to manufacture the textbook	Product cost			X
e. Straight-line depreciation on the office building	Period cost
f. Electricity used to run the presses during the printing of the textbook	Product cost			X
g. Sales commissions paid to textbook representatives for each textbook sold	Period cost
h. Paper on which the textbook is printed	Product cost	X
i. Book covers used to bind the pages	Product cost	X
j. Salaries of staff used to develop artwork for the textbook	Product cost			X
k. Glue used to bind pages to cover	Product cost			X
l. Salary of quality control supervisor who inspects each textbook before it is shipped	Product cost			X
m. Plant manager's salary	Product cost			X
n. Maintenance supplies	Product cost			X
o. Property taxes on the headquarters building	Period cost
p. Factory supervisors' salaries	Product cost			X
q. Travel costs of marketing executives to annual sales meeting	Period cost
r. Supplies used by the Accounting Department in preparing various managerial reports	Period cost
s. Fees paid to lawn service for office grounds upkeep	Period cost
t. Cost for marketing at a national conference	Period cost
u. Attorney fees for drafting a new lease for headquarters offices	Period cost
v. License fees for use of patent for printing press, based on number of textbooks produced	Product cost			X