EXERCISE 1-3 Classifying Costs as Product or Period Costs LO1-3 Suppose that you have been given a summer job as an intern at Issac Aircams, a company the manufactures sophisticated spy cameras for remote-controlled military reconnaissance aircraft The company, which is privately owned, has approached a bank for a loan to help finance is growth. The bank requires financial statements before approving the loan. Required: Classify each cost listed below as either a product cost or a period cost for the purpose of preparin financial statements for the bank. 1. Depreciation on salespersons' cars. 2. Rent on equipment used in the factory. Managerial Accounting and Cost Concepts 90 F 3. Lubricants used for machine maintenance. 4. Salaries of personnel who work in the finished goods warehouse. 5. Soap and paper towels used by factory workers at the end of a shift. 6. Factory supervisors' salaries. 7. Heat, water, and power consumed in the factory 8. Materials used for boxing products for shipment overseas. (Units are not normally boxed.) 9. Advertising costs. 10. Workers' compensation insurance for factory employees. Il. Depreciation on chairs and tables in the factory lunchroom 12. The wages of the receptionist in the administrative offices. 13. Cost of leasing the corporate jet used by the company's executives. 14. The cost of renting rooms at a Florida resort for the annual sales conference 15. The cost of packaging the company's product. EXERCISE 1-4 Fixed and Variable Cost Behavior LO1-4 Espresso Express operates a number of espresso coffee stands in busy suburban malls. The fixed weekly expense of a coffee stand is $1,200 and the variable cost per cup of coffee served is $0.22 Required: 1. Fill in the following table with your estimates of the company's total cost and average cost per cup of coffee at the indicated levels of activity. Round off the average cost per cup of coffee to the nearest tenth of a cent. Cups of Coffee Served in a Week 2,000 2,100 2,200 Fixed cost ............ Variable cost........... Total cost......... Average cost per cup of coffee served...... 2. Does the average cost per cup of coffee served increase, decrease, or remain the same as the number of cups of coffee served in a week increases? Explain