Question

The costs were taken from the accounting records of the Barnwell Manufacturing Company. Classify each item as either a product cost or a period cost. Also, classify all product costs as direct or indirect, assuming that the cost object is each unit of product manufactured. (If not applicable then select NA.)

(1) State income taxes
(2) Insurance on the manufacturing facilities
(3) Supplies used in manufacturing
(4) Wages for employees in the assembly department
(5) Wages for employees who deliver the product
(6) Interest on notes payable
(7) Materials used in the production process
(8) Rent for the sales outlet in Sacramento
(10) Depreciation expense on delivery trucks
(11) Wages for the sales staff
(12) Factory supervisors' salaries
(13) Company president's salary
(14) Advertising expense

Answer 1

In accounting, costs are categorized into product and period costs. Product costs directly related to the manufacturing process are classified further as either direct or indirect costs. Period costs are expensed in the period they are incurred and are not directly tied to the production process.

Step-by-step explanation:

In distinguishing between product costs and period costs, product costs are those that are directly associated with the manufacturing process and include direct materials, direct labor, and manufacturing overhead. Period costs are not directly tied to the production process and are expensed in the period in which they are incurred.

• State income taxes (1) - Period cost (NA)
• Insurance on the manufacturing facilities (2) - Product cost (Indirect)
• Supplies used in manufacturing (3) - Product cost (Indirect)
• Wages for employees in the assembly department (4) - Product cost (Direct)
• Wages for employees who deliver the product (5) - Period cost (NA)
• Interest on notes payable (6) - Period cost (NA)
• Materials used in the production process (7) - Product cost (Direct)
• Rent for the sales outlet in Sacramento (8) - Period cost (NA)
• Depreciation expense on delivery trucks (10) - Period cost (NA)
• Wages for the sales staff (11) - Period cost (NA)
• Factory supervisors' salaries (12) - Product cost (Indirect)
• Company president's salary (13) - Period cost (NA)
• Advertising expense (14) - Period cost (NA)

Answer 2

(1) State income taxes PERIOD COST

(2) Insurance on the manufacturing facilities INDIRECT COST

(3) Supplies used in manufacturing INDIRECT COST

(4) Wages for employees in the assembly department DIRECT COST

(5) Wages for employees who deliver the product PERIOD COST

(6) Interest on notes payable PERIOD COST

(7) Materials used in the production process DIRECT COST

(8) Rent for the sales outlet in Sacramento PERIOD COST

(10) Depreciation expense on delivery trucks PERIOD COST

(11) Wages for the sales staff PERIOD COST

(12) Factory supervisors' salaries INDIRECT COST

(13) Company president's salary PERIOD COST

(14) Advertising expense PERIOD COST

Step-by-step explanation:

(1) (5) (6) (8) (10) (11) (13) (14)

Are period cost as there are not cost related to the manufacturing of goods

(2) (3) (12) are indirect cost are these are not component of the product. They cannot be tracable to a unit

(4) (7) direct cost as they are lnked to the unit.