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Products and Period Costs Classification

M17-14 Classification of products and Periods Costs

Classify the following costs incurred by a manufacturer of golf clubs as product costs or period costs. Also classify the product costs as direct materials, or conversion costs.

a. Depreciation on computer in president's office
b. Salaries of legal staff
c. Graphite shafts
d. Plant security department
e. Electricity for the corporate office
f. Rubber grips
g. Golf club heads
h. Wages paid assembly line maintenance workers
i. Salary of corporate controller
j. Subsidy of plant cafeteria
k. Wages paid assembly line production workers
l. National sales meeting in Orlando
m. Overtime premium paid assembly line workers
n. Advertising on national television
o. Depreciation on assembly line.

M17-15 Developing and using a Predetermined Overhead Rate
Assume that the following predictions were made for 2009 for one of the plants of Milliken & Company:

Total manufacturing overhead for the year..$40,000,000
Total machine hours for the year 2,000,000

Actual results for February 2009 were as follow:

Manufacturing overhead $5,520,000
Machine hours 310,000

a. Determine the 2009 predetermined overhead rate per machine hour.
b. Using the predetermined overhead rate per machine hour, determine the manufacturing overhead applied to work-in-process during February.
c. As of February 1, actual overhead was underapplied by $400,000. Determine the cumulative amount of any overapplied or underapplied overhead at the end of February.

M17-16 Job order Costing and Process Costing Applications
For each of the following manufacturing situations, indicate whether job order or process costing is more appropriate and why.

a. Peanut butter manufacturer
b. Chemical plant that produces household cleaners
c. Shoe manufacturer
d. Modular home builder
e. Company that makes windshields for automobile manufacturers.


Solution Summary

Products and period cost classifications are examined.