Selling and administrative expenses are period costs PDF

Preview

Summary

Accounting for Manufacturing firms...

Description

Property Taxes and Cost differentiation for Manufacturing Selling and administrative expenses are period costs. ... The indirect materials used in the product are a variable overhead cost. The other product costs are materials used in products, labor costs of assembly line workers, factory supplies used, property taxes on the factory, and factory utilities Property taxes on the office building separate from the factory is a period cost, they would be included with other period costs such as selling and administrative costs, which would appear on the income statement Property taxes that are an element of the manufacturing plant or the land in which the plant is located are product costs- which are a part of manufacturing overhead, and therefore a part of the cost of goods manufactured. See the below example.

Ex. 174 Glavine Corporation incurred the following costs while manufacturing its product.

Materials used in product Depreciation on plant

$ 125,000

$45,000

Property taxes on plant

19,000

Delivery expense

21,000

Labor costs of assembly-line workers 110,000

Sales commissions

35,000

Factory supplies used

Salaries paid to sales clerks

50,000

Property taxes on store

60,000

Advertising expense

7,500

23,000

Work-in-process inventory was $27,000 at January 1 and $15,500 at December 31. Finished goods inventory was $65,000 at January 1 and $50,600 at December 31.

Instructions (a) Compute cost of goods manufactured. (b) Compute cost of goods sold.

Solution 174 (a) Work-in-process, 1/1...................................................

$ 27,000

Direct materials used..................................................

$ 125,000

Direct labor..................................................................

110,000

Manufacturing overhead Depreciation on plant............................................

$60,000

Factory supplies used...........................................

23,000

Property taxes on plant.........................................

19,000

Total manufacturing overhead.....................................

102,000

Total manufacturing costs...........................................

337,000

Total cost of work-in-process.......................................

364,000

Less: Work-in-process, 12/31...............................................

15,500

Cost of goods manufactured.......................................

$348,500

(b) Finished goods, 1/1.....................................................

$ 65,000

Cost of goods manufactured.......................................

348,500

Cost of goods available for sale..................................

413,500

Less: Finished goods, 12/31.......................................

50,600

Cost of goods sold......................................................

$362,900...