Question

Given below is a list of costs associated with making a pair of Nike shoes. Some of these costs would be classified as product costs and some as period costs. Use the schedule below to indicate which costs would be product and which would be period. Production Materials $ 9.00/ Factory rent 1.00/ Factory machine maintenance 0.60/ Administrative costs 0.75 /Factory utilities 0.40/ Production labor 2.75/ Duties on shipments out 3.00 /Factory maintenance workers 0.70 /Shipping costs for materials 0.50/ Labor supervision 0.30 Total $19.00.

Answer 1

Product Costs

Product costs are those that are incurred due to the production process. This will therefore include costs related to Direct labor, direct materials and factory overheads.

They include:

• Production Materials
• Factory rent
• Factory machine maintenance
• Factory utilities
• Production labor
• Factory maintenance workers
• Shipping costs for materials
• Labor supervision

Their total is therefore:

= 9 + 1 + 0.6 + 0.4 + 2.75 + 0.7 + 0.50 + 0.30

= $15.25

Period Costs

Period costs are those costs that aren't related to production but are incurred in a given period:

They include:

• Administrative costs
• Duties on shipments out

Total is:

= 0.75 + 3.00

= $3.75