Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

A surf shop, which produces and sells beach clothing, incurs the following costs 1. Cost of material used to make clothing 567.000 2. Wages paid

image text in transcribed
A surf shop, which produces and sells beach clothing, incurs the following costs 1. Cost of material used to make clothing 567.000 2. Wages paid to workers using sewing machines 298,000 3. Salaries of clothing designer 89,000 4. Salaries/commission paid to salespersons 112,000 5. Wages paid to workers who maintain sewing machines 56,000 6. Cost of electricity used for production area 67.000 7. Cost of advertising nationally 42.000 8. Cost of health insurance for production employees 35,000 9. Cost of health insurance for corporate employees 14,000 10. Cost of rent for manufacturing buiding 108,000 11. Depreciation expense on corporate office building 51,000 12. Salary to chief executive officer 150.000 13. Cost of thread that is not tracked by use 18.000 14 Cost of oil for sewing machines 7,000 Classify each cost as (A) direct material, (B) direct labor, (C) manufacturing overhead, or (D) period. Remember: Direct materials, direct labor, and manufacturing overhead costs are product costs. Administrative, selling, and warehouse expenses are period costs. (Warehouse expenses are classified as selling if the company doesn't categorize them separately.) Product costs are carried as inventory on the balance sheet until sold when they become expense. Period costs are expensed during period incurred and reported on the income statement. (Hint: To prepare for the last question, where you will be asked to compute the totals for these costs, write the headings for the four classifications on a sheet of paper. Then, as you classify each cost, enter the amount under the appropriate heading. Add the amounts in each column to obtain the totals. You will have the amounts needed to answer the last question.) Select the correct cost classification for each multiple-choice question. There is only one correct answer for each

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Auditing

Authors: Alan H. Millichamp

8th Edition

082645500X, 9780826455000

More Books

Students also viewed these Accounting questions