S2-8 Classify costs incurred by a dairy processing company

(Learning Objective 4)

Each of the following costs pertains to DairyPlains, a dairy processing company. Classify each of the company’s costs as a period cost or an inventoriable product cost.

Further classify inventoriable product costs as direct material (DM), direct labor (DL), or manufacturing overhead (MOH).

Cost Period Cost or Inventoriable Product Cost?
DM, DL, or MOH?
1. Cost of milk purchased from local dairy farmers 2. Depreciation on Marketing Department’s computers 3. Property tax on dairy processing plant 4. Gasoline used to operate refrigerated trucks delivering finished dairy products to grocery stores 5. Company president’s annual bonus 6. Depreciation on refrigerated trucks used to collect raw milk from local dairy farmers Cost Period Cost or Inventoriable Product Cost?
DM, DL, or MOH?
7. Plastic gallon containers in which milk is packaged 8. Research and development on improving milk pasteurization process 9. Television advertisements for DairyPlains’ products 10. Lubricants used in running bottling machines 11. Wages and salaries paid to machine operators at dairy processing plant