Manegerial Accounting

2-28

Consider the following costs that were incurred during the current year:
(Answers are written in BLUE letter for easier access).

1. Tire costs incurred by Ford Motor Company.

Product cost, Variable, Direct Material

2. Sales commissions paid to the sales force of Dell Inc.

Period Cost, Variable

3. Wood glue consumed in the manufacture of Thomasville furniture.

Product cost, Variable, Direct Material

4. Hourly wages of refinery security guards employed by ExxonMobil Corporation.
Product cost, Variable, Manufacturing Overhead

5. The salary of a financial vice president of Hewlett Packard.

Period Cost, Fixed

6. Advertising costs of Coca-Cola.

Period Cost, Fixed

7. Straight-line depreciation on factory machinery of Boeing Corporation.
Prodcut Cost, Fixed, Manufacturing Overhead

8. Wages of assembly-line personnel of Whirlpool Corporation.

Product Cost, Variable, Direct Labor

9. Delivery costs on customer shipments of Ben & Jerry’s ice cream.

Period Cost, Variable

10. Newsprint consumed in printing The New York Times.

Product cost, Variable, Direct Material

11. Plant insurance costs of Texas Instruments.

Product Cost, Fixed, Manufacturing Overhead

12. Glass costs incurred in light-bulb manufacturing of General Electric.

Product cost, Variable, Direct Material

Required: Evaluate each of the preceding and determine whether the cost is ( a ) a product cost or a period cost, ( b ) variable or fixed in terms of behavior, and ( c ) for the product costs only, whether the cost is properly classified as direct material, direct labor, or manufacturing overhead. Item 1 is done as an example: Tire costs: Product cost, variable, direct material

3-46

Finlon Upholstery, Inc. uses a job-order costing system to