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Chapter 16: Q2TI_6 (page 869)

Identify each cost as a period cost or a product cost. If it is a product cost, further indicate if the cost is direct materials, direct labor, or manufacturing overhead. Then determine if the product cost is a prime cost and/or a conversion cost.

11.Salary of the sales manager

Short Answer

Expert verified

The salary of the sales manager is period cost.

Step by step solution

01

Definition of direct labor

Directlabor is defined as the cost incurred by the business to pay for the labor which is directly associated with the production process.

02

Identification of costs

The salary of the sales manager will be considered period cost as it does not involve any purchase of goods or production of goods. It is an administrative expense incurred by the company.

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Most popular questions from this chapter

Identify the following characteristics as primarily related to financial accounting (FA) or managerial accounting (MA):

3. Is not required to follow GAAP.

Question:Determining flow of costs through a manufacturer鈥檚 inventory accounts

Root Shoe Company makes loafers. During the most recent year, Root incurred total manufacturing costs of \(26,300,000. Of this amount, \)2,000,000 was direct materials used and \(19,800,000 was direct labor. Beginning balances for the year were Direct Materials, \)700,000; Work-in-Process Inventory, \(1,500,000; and Finished Goods Inventory, \)400,000. At the end of the year, balances were Direct Materials, \(800,000; Work-in-Process Inventory, \)1,200,000; and Finished Goods Inventory, $600,000.

Requirements Analyze the inventory accounts to determine:

1. Cost of direct materials purchased during the year.

2. Cost of goods manufactured for the year.

3. Cost of goods sold for the year.

List the three inventory accounts used by manufacturing companies, and describe each.

Making ethical decisions

Sue Peters is the controller at Vroom, a car dealership. Dale Miller recently has been hired as the bookkeeper. Dale wanted to attend a class in Excel spreadsheets, so Sue temporarily took over Dale鈥檚 duties, including overseeing a fund used for gas purchases before test drives. Sue found a shortage in the fund and confronted Dale when he returned to work. Dale admitted that he occasionally uses the fund to pay for his own gas. Sue estimated the shortage at $450.

Requirements 2. Would you change your answer if Sue Peters was the one recently hired as controller and Dale Miller was a well-liked, long time employee who indicated he always eventually repaid the fund?

Question:Classifying period costs and product costs

Lawlor, Inc. is the manufacturer of lawn care equipment. The company incurs the following costs while manufacturing weed trimmers:

鈥� Shaft and handle of weed trimmer

鈥� Motor of weed trimmer

鈥� Factory labor for workers assembling weed trimmers

鈥� Nylon thread used by the weed trimmer (not traced to the product)

鈥� Glue to hold the housing together

鈥� Plant janitorial wages

鈥� Depreciation on factory equipment

鈥� Rent on plant

鈥� Sales commissions

鈥� Administrative salaries

鈥� Plant utilities

鈥� Shipping costs to deliver finished weed trimmers to customers

Requirements

1. Describe the difference between period costs and product costs.

2. Classify Lawlor鈥檚 costs as period costs or product costs. If the costs are product costs, further classify them as direct materials, direct labor, or manufacturing overhead.
See all solutions

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