Accounting
E19-3 Bacala Corporation
(a) Identify each of the costs as direct materials, direct labor, manufacturing overhead, or period costs.
Materials used in product $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 – Manufacturing overhead
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
(b) Explain the basic difference in accounting for product costs and period costs.
Product costs are manufacturing costs, direct components, direct labor and manufacturing overhead, do not become expenditures until the company sells inventory. Period costs are non-manufacturing costs, including selling and administrative expenses.
E19-8 Craig Corporation
(a) Compute cost of goods manufactured.
$100,000
110,000 60,000 14,000 7,500 23,000
$314,500
12,000 15,500
$311,000
Material used
Labor cost
Depreciation on plant
Property tax on plant
Property tax on store
Factory supplies used
Total manufacturing cost
Add work in progress (January 1)
Less work in progress (December 31)
Cost of goods manufactured
(b) Compute cost of goods sold.
$311,000
60,000 55,600
$315,400
Cost of goods manufactured
Add finished goods (January 1)
Less finished goods (December 31)
Cost of goods sold
P19-1A Fabila Company
(a) Prepare an answer sheet with the following column headings.
Product costs
Cost item
Direct Material
Direct Labor
Manufacturing overhead
Period costs
Rent on factory equipment $7,000
X
Insurance on factory building $1,500
X
Raw materials (plastics, polystyrene, etc.) $75,000
X
Utility costs for factory $900
X
Supplies for general office $300
X
Wages for assembly line workers
(a) Identify each of the costs as direct materials, direct labor, manufacturing overhead, or period costs.
Materials used in product $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 – Manufacturing overhead
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
(b) Explain the basic difference in accounting for product costs and period costs.
Product costs are manufacturing costs, direct components, direct labor and manufacturing overhead, do not become expenditures until the company sells inventory. Period costs are non-manufacturing costs, including selling and administrative expenses.
E19-8 Craig Corporation
(a) Compute cost of goods manufactured.
$100,000
110,000 60,000 14,000 7,500 23,000
$314,500
12,000 15,500
$311,000
Material used
Labor cost
Depreciation on plant
Property tax on plant
Property tax on store
Factory supplies used
Total manufacturing cost
Add work in progress (January 1)
Less work in progress (December 31)
Cost of goods manufactured
(b) Compute cost of goods sold.
$311,000
60,000 55,600
$315,400
Cost of goods manufactured
Add finished goods (January 1)
Less finished goods (December 31)
Cost of goods sold
P19-1A Fabila Company
(a) Prepare an answer sheet with the following column headings.
Product costs
Cost item
Direct Material
Direct Labor
Manufacturing overhead
Period costs
Rent on factory equipment $7,000
X
Insurance on factory building $1,500
X
Raw materials (plastics, polystyrene, etc.) $75,000
X
Utility costs for factory $900
X
Supplies for general office $300
X
Wages for assembly line workers