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Chapter 16: Q2TI_4 (page 869)

Identify each cost as a period cost or a product cost. If it is a product cost, further indicate if the cost is direct materials, direct labor, or manufacturing overhead. Then determine if the product cost is a prime cost and/or a conversion cost.

9. Sugar and flour used to make cookies

Short Answer

Expert verified

It is a product cost, direct material and the prime cost

Step by step solution

01

Definition of the direct material

Direct materials are defined as the raw material which is directly related to the production process of the business.

02

Identification of costs

The salary and flour used to make cookies will be considered as the product cost as it is directly related to the making of the product.

It will also be considered as the direct material.

It is a prime cost, as it is a combination of direct materials and direct labor.

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Most popular questions from this chapter

Give five examples of manufacturing overhead.

Classifying costs Wheels, Inc. manufactures wheels for bicycles, tricycles, and scooters. For each cost given below, determine if the cost is a product cost or a period cost. If the cost is a product cost, further determine if the cost is direct materials (DM), direct labor (DL), or manufacturing overhead (MOH) and then determine if the product cost is a prime cost, conversion cost, or both. If the cost is a period cost, further determine if the cost is a selling expense or administrative expense (Admin). Cost (a) is answered as a guide

Cost Product Period

DM DL MOH Prime Conversion Selling Admin.

a. Metal used for rims

b. Sales salaries

c. Rent on factory

d. Wages of assembly workers

e. Salary of production supervisor

f. Depreciation on office equipment

g. Salary of CEO

h. Delivery expense

Identify each cost as a period cost or a product cost. If it is a product cost, further indicate if the cost is direct materials, direct labor, or manufacturing overhead. Then determine if the product cost is a prime cost and/or a conversion cost.

8. Property taxes on the factory

Identifying product costs and period costs Classify each cost of a paper manufacturer as either a product cost or a period cost:

d. Salaries of the company’s top executives.

ABC Manufacturing Company has the following data for 2019 (amounts in millions):

Direct Materials, January 1 $ 5

Direct Materials, December 31 7

Work-in-Process Inventory, January 1 12

Work-in-Process Inventory, December 31 16

Finished Goods Inventory, January 1 8

Finished Goods Inventory, December 31 6

Direct Materials Purchased, including Freight In 25

Direct Labor 36

Manufacturing Overhead 17

Prepare the schedule of cost of goods manufactured and the cost of goods sold section of the income statement for the year ended December 31, 2019.
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