Classifying costs

 

The following is a list of costs that were incurred in the production and sale of large commercial airplanes:

a.     Salary of chief compliance officer of company

b.     Power used by painting equipment

c.     Instrument panel installed in the airplane cockpit

d.     Annual bonus paid to the chief operating officer of the company

e.     Turbo-charged airplane engine

f.      Interior trim material used throughout the airplane cabin

g.     Cost of normal scrap from production of airplane body

h.     Hourly wages of employees that assemble the airplane

i.       Salary of the marketing department personnel

j.      Cost of paving the headquarters employee parking lot

k.     Cost of electrical wiring throughout the airplane

l.       Cost of electronic guidance system installed in the airplane cockpit

m.   Salary of plant manager

n.     Cost of miniature replicas of the airplane used to promote and market the airplane

o.     Human resources department costs for the year

p.     Metal used for producing the airplane body

q.     Annual fee to a celebrity to promote the aircraft

r.      Hydraulic pumps used in the airplane’s flight control system

s.      Yearly cost of the maintenance contract for robotic equipment

t.      Prebuilt leather seats installed in the first-class cabin

u.     Depreciation on factory equipment

v.     Special advertising campaign in Aviation World magazine

w.    Oil to lubricate factory equipment

x.     Masks for use by painters in painting the airplane body

y.     Decals for cockpit door, the cost of which is immaterial to the cost of the final product

z.     Salary of chief financial officer

Instructions

Classify each cost as either a product cost or a period cost. Indicate whether each product cost is a direct materials cost, a direct labor cost, or a factory overhead cost. Indicate whether each period cost is a selling expense or an administrative expense. Use the following tabular headings for your answer, placing an “X” in the appropriate   column:

Product Costs                                            Period Costs

 

	Direct	Direct	Factory
	Materials	labor	Overhead		Selling	Administrative
Cost	Cost	Cost	Cost		Expense	Expense