Product/Period Costs
A company with no product costs and all period costs
What is a service company?
Rags used to clean the factory
Indirect (Material)
The cost of making an item
Prime cost
Costs that fall under the Production/Purchases category in the value chain
What are period costs?
Wages for the Factory Supervisor
Indirect (Labor)
Find the conversion cost:
Utilities for the factory:$20Wages for factory workers:$300
Wages for factory janitors:$100
Depreciation on machines in the factory:$500
Cost of raw materials:$30,000
$920
Accumulate these costs as inventory on the balance sheet, then expense these as COGS on the income statement
What are product costs?
Metal used for building the product
Direct (Material)
Direct Labor
Expense these immediately as operating expenses on the income statement
What are period costs?
Wages for Assembly line workers
Direct (Labor)
Name all of the different types of Product costs
Direct Labor, Direct Material, Indirect Labor, Indirect Material, other MOH
What are the product costs?
Rearranging store layout:$700
Newspaper advertisements:$6,000
Customer Complaint Department:$400
Payment to consultant for advice on location of new store:$2,500
Research on whether store should sell satellite radio service:$100
Purchases of merchandise:$50,000
Depreciation expense on delivery trucks:$1,500
Freight-in:$4,000
Salespeople's salaries:$20
$54,000
Depreciation on the factory
Indirect (MOH)
True or False:
Depreciation on delivery trucks for a company such as Amazon will fall under other MOH
False, it's a period cost