Question

Trak Corporation incurred the following costs while manufacturing its bicycles.

Bicycle components $100,000 Advertising expense $45,000
Depreciation on plant 60,000 Property taxes on plant 14,000
Property taxes on store 7,500 Delivery expense 21,000
Labor costs of assembly-
line workers 110,000 Sales commissions 35,000
Factory supplies used 13,000 Salaries paid to sales clerks 50,000
Identify each of the above costs as direct materials, direct labor, manufacturing overhead, or period costs.
Bicycle components
Depreciation on plant
Property taxes on store
Labor costs of assembly-line workers
Factory supplies used
Advertising expense
Property taxes on plant
Delivery expense
Sales commissions
Salaries paid to sales clerks

Answer 1

Required: Identify the costs as direct materials, direct labor, manufacturing overhead, or period costs.

They are classified below:

Bicycle components: DIRECT MATERIALS

Depreciation on plant: MANUFACTURING OVERHEAD

Property taxes on store: PERIOD COST

Labor costs of assembly-line workers: DIRECT LABOUR

Factory supplies used: MANUFACTURING OVERHEAD

Advertising expense: PERIOD COST

Property taxes on plant: MANUFACTURING OVERHEAD

Delivery expense: PERIOD COST

Sales commissions: PERIOD COST

Salaries paid to sales clerks: MANUFACTURING OVERHEAD

Definition of terms used:

Period cost is any cost incurred which was not directly involved during production.

Manufacturing overhead can be said to be indirect costs incurred during production.

Direct labour costs involves payment made to workers involved in production.

Direct materials cost are costs of raw materials used in production.

Therefore,

Bicycle components are classified as direct materials.

Depreciation on plant are classified as manufacturing overhead.

Property taxes on store are classified as period cost.

Labor costs of assembly-line workers are classified as direct labour.

Factory supplies used are classified as manufacturing overhead.

Advertising expense is classified as period cost

Property taxes on plant are classified as manufacturing overhead.

Delivery expenseis classified as period cost.

Sales commissions is classified as period cost.