1. Classifying A payment of cash (or a commitment to pay cash in the future) for the purpose of generating revenues.Costs

   The following is a list of costs that were incurred in the production and sale of large commercial airplanes:

   Classify each cost as either a The three components of manufacturing cost: direct materials, direct labor, and factory overhead costs.product cost or a Those costs that are used up in generating revenue during the current period and that are not involved in manufacturing a product, such as selling, general, and administrative expenses.period cost. Indicate whether each product cost is a The cost of materials that are an integral part of the finished product.direct materials cost, a The wages of factory workers who are directly involved in converting materials into a finished product.direct labor cost, or a All of the costs of producing a product except for direct materials and direct labor.factory overhead cost. Indicate whether each period cost is a selling expense or an administrative expense.

   Costs	Classification
   a. Salary of chief compliance officer of company	Product costs-direct materials cost Product costs-direct labor cost Product costs-factory overhead cost Period costs-selling expense Period costs-administrative expense
   b. Power used by painting equipment	Product costs-direct materials cost Product costs-direct labor cost Product costs-factory overhead cost Period costs-selling expense Period costs-administrative expense
   c. Instrument panel installed in the airplane cockpit	Product costs-direct materials cost Product costs-direct labor cost Product costs-factory overhead cost Period costs-selling expense Period costs-administrative expense
   d. Annual bonus paid to the chief operating officer of the company	Product costs-direct materials cost Product costs-direct labor cost Product costs-factory overhead cost Period costs-selling expense Period costs-administrative expense
   e. Turbo-charged airplane engine	Product costs-direct materials cost Product costs-direct labor cost Product costs-factory overhead cost Period costs-selling expense Period costs-administrative expense
   f. Interior trim material used throughout the airplane cabin	Product costs-direct materials cost Product costs-direct labor cost Product costs-factory overhead cost Period costs-selling expense Period costs-administrative expense
   g. Cost of normal scrap from production of airplane body	Product costs-direct materials cost Product costs-direct labor cost Product costs-factory overhead cost Period costs-selling expense Period costs-administrative expense
   h. Hourly wages of employees that assemble the airplane	Product costs-direct materials cost Product costs-direct labor cost Product costs-factory overhead cost Period costs-selling expense Period costs-administrative expense
   i. Salary of the marketing department personnel	Product costs-direct materials cost Product costs-direct labor cost Product costs-factory overhead cost Period costs-selling expense Period costs-administrative expense
   j. Cost of paving the headquarters employee parking lot	Product costs-direct materials cost Product costs-direct labor cost Product costs-factory overhead cost Period costs-selling expense Period costs-administrative expense
   k. Cost of electrical wiring throughout the airplane	Product costs-direct materials cost Product costs-direct labor cost Product costs-factory overhead cost Period costs-selling expense Period costs-administrative expense
   l. Cost of electronic guidance system installed in the airplane cockpit	Product costs-direct materials cost Product costs-direct labor cost Product costs-factory overhead cost Period costs-selling expense Period costs-administrative expense
   m. Salary of plant manager	Product costs-direct materials cost Product costs-direct labor cost Product costs-factory overhead cost Period costs-selling expense Period costs-administrative expense
   n. Cost of miniature replicas of the airplane used to promote and market the airplane	Product costs-direct materials cost Product costs-direct labor cost Product costs-factory overhead cost Period costs-selling expense Period costs-administrative expense
   o. Human resources department costs for the year	Product costs-direct materials cost Product costs-direct labor cost Product costs-factory overhead cost Period costs-selling expense Period costs-administrative expense
   p. Metal used for producing the airplane body	Product costs-direct materials cost Product costs-direct labor cost Product costs-factory overhead cost Period costs-selling expense Period costs-administrative expense
   q. Annual fee to a celebrity to promote the aircraft	Product costs-direct materials cost Product costs-direct labor cost Product costs-factory overhead cost Period costs-selling expense Period costs-administrative expense
   r. Hydraulic pumps used in the airplanes flight control system	Product costs-direct materials cost Product costs-direct labor cost Product costs-factory overhead cost Period costs-selling expense Period costs-administrative expense
   s. Yearly cost of the maintenance contract for robotic equipment	Product costs-direct materials cost Product costs-direct labor cost Product costs-factory overhead cost Period costs-selling expense Period costs-administrative expense
   t. Prebuilt leather seats installed in the first-class cabin	Product costs-direct materials cost Product costs-direct labor cost Product costs-factory overhead cost Period costs-selling expense Period costs-administrative expense
   u. Depreciation on factory equipment	Product costs-direct materials cost Product costs-direct labor cost Product costs-factory overhead cost Period costs-selling expense Period costs-administrative expense
   v. Special advertising campaign in Aviation World magazine	Product costs-direct materials cost Product costs-direct labor cost Product costs-factory overhead cost Period costs-selling expense Period costs-administrative expense
   w. Oil to lubricate factory equipment	Product costs-direct materials cost Product costs-direct labor cost Product costs-factory overhead cost Period costs-selling expense Period costs-administrative expense
   x. Masks for use by painters in painting the airplane body	Product costs-direct materials cost Product costs-direct labor cost Product costs-factory overhead cost Period costs-selling expense Period costs-administrative expense
   y. Decals for cockpit door, the cost of which is immaterial to the cost of the final product	Product costs-direct materials cost Product costs-direct labor cost Product costs-factory overhead cost Period costs-selling expense Period costs-administrative expense
   z. Salary of chief financial officer	Product costs-direct materials cost Product costs-direct labor cost Product costs-factory overhead cost Period costs-selling expense Period costs-administrative expense

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