PROBLEM I

INSTRUCTIONS

Use the following tabular heading for your answer, placing an X in the appropriate column.

Classify each cost as either a product cost or period cost. Indicate whether each product cost is a direct material cost, a direct labor cost, or a factory overhead cost. Indicate whether each period cost is a selling expense or an administrative expense.

The following is a list of costs that we incurred in the production and sales of boats:

a. Cost of metal hardware for boats, such as ornaments and tie down grasps.

b. Power used by sanding equipment.

c. Yearly cost of maintenance contract for robotics equipment

d. Premiums on business interruption insurance in case of natural disaster.

e. Cost of normal scrap from defective hulls.

f. Masks for use by sanders in smoothing boat hull.

g. Cost of paving the employee parking lot.

h. Hourly wage of assembly line workers.

i. Oil to lubricate factory equipment.

j. Straight line depreciation on factory equipment.

k. Wood paneling for use in interior boat rim.

l. Commission to sales representatives, based upon the number of boats sold.

m. Steering wheels.

n. Special advertising campaign in Bass World.

o. Cost of boat fro grand prize promotion in local bass tournament.

p. Membership for key executives in the Bass World Association.

q. Navigation and fishing instruments for boats.

r. Cost of electrical wiring for boats.

s. Executives end-of-year bonuses.

t. Salary shop supervisor.

u. Decals for boat hulls.

v. Annual fee for Jim Bo Wilks, a famous fisherman to promote the boats.

w. Legal department cost for the year.

x. Paint for boats.

y. Salary of president of the company.

z. Fiberglass for producing the boat hull.