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Important information about Classification of Manufacturing Costs

Accounting: Concepts & Applications, by Albrecht. Chapter 15: Exercise 15-23 Cost Classifications - Cost Classifications

Classify the costs as (1) product or period; (2) variable or fixed; and (3) for those that are product costs, as direct materials, direct labor, or manufacturing overhead.

The following are costs associated with manufacturing firms, merchandising firms, or service firms:

a. Miscellaneous materials used in production
b. Salesperson's commission in a real estate firm
c. Administrators' salaries for a furniture wholesaler
d. Administrators' salaries for a furniture manufacturer
e. Freight costs associated with acquiring inventories for a grocery store
f. Office manager's salary in a doctor's office
g. Utilities for the corporate offices of a toy manufacturer
h. Line supervisor's salary for a clothing manufacturing firm
i. Training seminar for sales staff of a service firm
j. Fuel used in a trucking firm
k. Paper used at a printing business
l. Oil for machinery at a plastics manufacturing firm
m. Food used at a restaurant
n. Windshields used for a car manufacturer

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Solution Preview

First the definitions:

Product costs become part of the cost of product but period costs are required to product the product.

Variable costs change with production levels but fixed costs don't (within a given range).

If a cost can't be defined as direct material or labor, then it is manufacturing overhead (also known as factory overhead or production overhead.

a. Miscellaneous materials used in production
Product cost, variable, ...

Solution Summary

Each of the costs associated with manufacturing firms are classified as the problem requests including some explanations as necessary for understanding.