Select your language

Suggested languages for you:
Log In Start studying!
Answers without the blur. Just sign up for free and you're in → Illustration

Q26PGA

Expert-verified
Horngren'S Financial And Managerial Accounting
Found in: Page 894

Short Answer

Question: Classifying period costs and product costs

Lawlor, Inc. is the manufacturer of lawn care equipment. The company incurs the following costs while manufacturing weed trimmers:

• Shaft and handle of weed trimmer

• Motor of weed trimmer

• Factory labor for workers assembling weed trimmers

• Nylon thread used by the weed trimmer (not traced to the product)

• Glue to hold the housing together

• Plant janitorial wages

• Depreciation on factory equipment

• Rent on plant

• Sales commissions

• Administrative salaries

• Plant utilities

• Shipping costs to deliver finished weed trimmers to customers

Requirements

1. Describe the difference between period costs and product costs.

2. Classify Lawlor’s costs as period costs or product costs. If the costs are product costs, further classify them as direct materials, direct labor, or manufacturing overhead.

Period costs are operating costs and products costs are associated with products and classification into period costs and product costs is done as required.

See the step by step solution

Step by Step Solution

Step-by-Step SolutionStep 1: Difference between period costs and product costs

Period costs are defined as the operating costs that are expensed in the accounting period in which they are incurred. On the other hand, product cost includes all the costs of the product as required by the GAAP. These costs are recorded as the asset until the goods are sold. If the goods are sold then they are recorded as the cost of goods sold (expense).

Step 2: Classification of the costs

Costs

Classification

Shaft and handle of weed trimmer

Product cost, Direct material

The motor of weed trimmer

Product cost, Direct material

Factory labor for workers assembling weed trimmers

Product cost, Direct labor

Nylon thread used by the weed trimmer (not traced to the product)

Product cost, Manufacturing Overhead

Glue to hold the housing together

Product cost, Manufacturing Overhead

Plant janitorial wages

Product cost, Manufacturing Overhead

Depreciation on factory equipment

Product cost, Manufacturing Overhead

Rent on plant

Product cost, Manufacturing Overhead

Sales commissions

Period Costs

Administrative salaries

Period Costs

Plant utilities

Product cost, Manufacturing Overhead

Shipping costs to deliver finished weed trimmers to customers

Period Costs

Most popular questions for Business-studies Textbooks

Icon

Want to see more solutions like these?

Sign up for free to discover our expert answers
Get Started - It’s free

Recommended explanations on Business-studies Textbooks

94% of StudySmarter users get better grades.

Sign up for free
94% of StudySmarter users get better grades.