Coldplay Corporation incurred the following costs while manufacturing its produc
ID: 2387699 • Letter: C
Question
Coldplay Corporation incurred the following costs while manufacturing its product.Materials used in product $100,000 Advertising expense $45,000
Depreciation on plant 60,000 Property taxes on plant 14,000
Property taxes on store 7,500 Delivery expense 21,000
Labor costs of assembly-line workers 110,000 Sales commissions 35,000
Factory supplies used 13,000 Salaries paid to sales clerks 50,000
a. Identify each of the above costs as direct materials, direct labor, manufacturing
overhead, or period costs.
b. Explain the basic difference in accounting for product costs and period costs
Explanation / Answer
Materials used in product $100,000 - Direct material Advertising expense $45,000 - Period costs Depreciation on plant 60,000 - Manufacturing overhead Property taxes on plant 14,000 - Manufacturing overhead Property taxes on store 7,500 - Manufacturing overhead Delivery expense 21,000 - Manufacturing overhe Labor costs of assembly-line workers 110,000 - Direct labour Sales commissions 35,000 - Period costs Factory supplies used 13,000 - Direct material Salaries paid to sales clerks 50,000 - Direct labour Product costs means which is directly related to the product. Changes in the no of units produced changes the product costs Period costs means which is directly related to the passage of the time. Changes in the no of days worked changes the product costs