[ebonysykes]

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

A. Miscellaneous materials used in production (3)
B. Salesperson’s commission in real estate firm (2)
C. Administrators’ salaries for a furniture wholesaler (2)
D. Administrators’ salaries for a furniture manufacturer (2)
E. Freight costs associated with acquiring inventories for a grocery store (2)
F. Office managers salary in a doctors office (1)
G. Utilities for the corporate offices of a toy manufacturer (2)
H. Line supervisors salary for a clothing manufacturing firm (2)
I. Training seminar for sales staff of a service firm N/A
J. Fuel used in a trucking firm (1)
K. Paper used at a printing business (1)
L. Oil for machinery at a plastics manufacturing firm (1)
M. Food used at a restaurant (1)
N. Windshields used for a car manufacturer (3)


Classify the cost as (1) product or period (2) variable or fixed; and (3) for those that are product-costs, direct materials, direct labor, or manufacturing overhead. Write “not applicable (N/A)(: if a category doesn’t apply.

This is what I came up with. Help if any one can.

[morgaine300]

This isn't a choice between (1), (2) and (3).

(1) is a choice between product or period.
(2) is a choice between variable or fixed.
(3) is a choice between direct materials, direct labor or overhead

You have to do all three of them. (Or rather, you have to do (1) and (2), and if it's product you also have to do that 3rd one.)

So I'll try to explain this and let you try again.

First, all production-related costs are product costs. Selling and administrative costs are period costs. So the best thing to do is divide it between those first. Think of the factory being a separate building and anything that goes on over there is a product costs. Then you have your offices (admin). Then think of a place that would also have a store-front and everything in there is selling. So to decide between product and period, it's not what it is, but what it's for.

For example, depreciation. Depreciation isn't either in and of itself. But depreciation for the factory machinery is product, and depreciation for the cash registers is period (selling).

So decide that first.

Then product costs are divided into direct materials, direct labor and overhead.

See here for an explanation I already wrote about the difference between direct and indirect costs:

https://www.askmehelpdesk.com/financ...ts-184199.html

Now, the indirect material and indirect labor go into overhead. And all other production costs go into overhead also. That could consist of just about anything: depreciation, insurance on the factory, utilities for the factory, factory supplies, just all kinds of stuff. If you've determined it's a production cost, and it's not direct materials or direct labor, it's overhead. So that's the catch-all account.

With the above information, see if you can try this again and we'll see how you do.

[morgaine300]

Oops, left out the fixed and variable. I know I just gave a lengthy answer to this one recently too but can't find it. So I did a search and found a pretty good explanation here:

https://www.askmehelpdesk.com/accoun...st-175597.html

Just an added note to that. The example near the bottom about the electricity would be considered a mixed costs, i.e. part fixed and part variable. Your problem has not asked for that. (Though it doesn't hurt to know about it.) That doesn't mean electricity doesn't count... you just have to see how it's applied.

Let's just do your first one as an example of the process to go through.
Miscellaneous materials used in production.

Well, first that's production. So that makes it a product cost. So (1) is product.

Now, variable or fixed. Since it's materials, we assume it's going to vary with production level. i.e. you make 100 you only use enough materials for 100. You make 1000, you need enough materials for 1000. So it varies with production. So (2) is variable.

Since it's a product cost, we also have to answer (3). It's certainly not labor of any kind (direct or indirect). It's materials. But is it direct? No, because it's "miscellaneous." So it's indirect materials. And indirect materials is overhead. So (3) is overhead.

That's how you have to do each one.

[lovelyp]

Morgaine, are you saying those answers are wrong at the top?

[ebonysykes]

yes they are. My instructor gave us an example

Product or Variable or direct Materials, direct labor
Period cost fixed cost manufacturing overhead


A. Product Variable Manufacturing overhead



I hope this helps.

[lovelyp]

Thanks. It helped a lot.

[stinkydjinni]

a) 1-Product 2-Variable 3-Manufactoring Overhead
b) 1-Period 2-Variable 3- N/A
c) 1-Period 2-Fixed 3-N/A
d) 1-Period 2-Fixed 3-Direct labor
e) 1-Period 2-Variable 3-N/A
f) 1-Period 2-Fixed 3-N/A
g) 1-Period 2-Variable 3-N/A
h) 1-Period 2-Fixed 3-Direct labor
I) 1-Product 2-Variable 3-Direct labor
j) 1-Period 2-Variable 3-N/A
k) 1-Product 2-Variable 3-Direct material
l) 1-Period 2-Variable 3-Manufactoring overhead
m) 1-Product 2-Variable 3-Direct material
n) 1-Product 2-Variable 3-Direct material

This is what I got, but I am always worried when I have a lot of one answer. Any help is much appreciated!