Question

Trak Corporation incurred the following costs while manufacturing its bicycles.

Bicycle components
$100,000Advertising expense$45,000 Depreciation on plant60,000Property taxes on plant14,000 Property taxes on store7,500Delivery expense21,000 Labor costs of assembly-line workers110,000Sales commissions35,000 Factory supplies used13,000Salaries paid to sales clerks50,000

Identify each of the above costs as direct materials, direct labor, manufacturing overhead, or period costs.

Answer 1

See the explanation below.

Step-by-step explanation:

Too answer the question, each of the cost items is first explained as follows:

a. Direct materials cost: These materials and supplies that are used when a product is being manufactured.

b. Direct labor: This is labor that is involved in converting materials to finished good. They are directly involved in production.

c. Manufacturing overhead: These are cost incurred in the process of producing a good.

d. Period costs: These are part of selling and administrative expenses.

Based on the above, each of the costs can be identified as follows:

Bicycle components $100,000 = direct materials

Advertising expense $45,000 = period costs

Depreciation on plant 60,000 = manufacturing overhead

Property taxes on plant 14,000 = manufacturing overhead

Property taxes on store 7,500 = period costs

Delivery expense 21,000 = period costs

Labor costs of assembly-line workers 110,000 = direct labor

Sales commissions 35,000 = period costs

Factory supplies used 13,000 = direct materials

Salaries paid to sales clerks 50,000 = period costs