Your friend, suzie whitson, has designed a new type of outdoor toy that children learn basic concepts such as colors, numbers, and shapes. suzie’s product will target two groups: day care centers in warm climates and home school programs. her company is jiffy jet and costs for last month follow:
factory rent $ 3,030
company advertising 1,060
wages paid to assembly workers 31,400
depreciation for salespersons’ vehicles 2,140
screws 595
utilities for factory 825
assembly supervisor’s salary 3,640
sandpaper 125
president’s salary 5,050
plastic tubing 4,080
paint 240
sales commissions 1,330
factory insurance 1,010
depreciation on cutting machines 2,120
wages paid to painters 8,000
assume that suzie whitson has decided to begin production of her outdoor children’s toy.
required:
1 and 2. identify each of the preceding costs as either a product or a period cost. if the cost is a product cost, decide whether it is for direct materials (dm), direct labor (dl), or manufacturing overhead (moh) and also identify each of the preceding costs as variable or fixed cost.

Factory rent $ 3,030: Product - MOH - Fixed

Company advertising 1,060: Period - Variable

Wages paid to assembly workers 31,400: Product - DL - Variable

Depreciation for salespersons’ vehicles 2,140: Period - Fixed

Screws 595: Product - DM - Variable

Utilities for factory 825: Product - MOH - Variable

Assembly supervisor’s salary 3,640: Product - MOH - Fixed

Sandpaper 125: Product - MOH - Variable

President’s salary 5,050: Period - Fixed

Plastic tubing 4,080: Product - MOH - variable

Paint 240: Product - DM - Variable

Sales commissions 1,330: Period - Variable

Factory insurance 1,010: Product - MOH - fixed

Depreciation on cutting machines 2,120: Product - MOH - Fixed

Wages paid to painters 8,000:  Product - DL - Variable

Explanation:

- Direct materials are those materials and supplies that are consumed during the manufacture of a product, and which are directly identified with that product.

- Direct labor is production or services labor that is assigned to a specific product, cost center, or work order.  

- Manufacturing overhead refers to indirect factory-related costs that are incurred when a product is manufactured.

- Period costs are not directly tied to the production process. Overhead or sales, general, and administrative (SG&A) costs are considered period costs. SG&A includes costs of the corporate office, selling, marketing, and the overall administration of company business.

- Product costs are the direct costs involved in producing a product. A manufacturer, for example, would have production costs that include: Direct labor, Raw materials, Manufacturing supplies, Overhead that's directly tied to the production facility such as electricity.

- Variable cost is a corporate expense that changes in proportion to production output.

- Fixed cost is a cost that does not change with an increase or decrease in the amount of goods or services produced or sold.

In this exercise:

Factory rent $ 3,030: Product - MOH - Fixed

Company advertising 1,060: Period - Variable

Wages paid to assembly workers 31,400: Product - DL - Variable

Depreciation for salespersons’ vehicles 2,140: Period - Fixed

Screws 595: Product - DM - Variable

Utilities for factory 825: Product - MOH - Variable

Assembly supervisor’s salary 3,640: Product - MOH - Fixed

Sandpaper 125: Product - MOH - Variable

President’s salary 5,050: Period - Fixed

Plastic tubing 4,080: Product - MOH - variable

Paint 240: Product - DM - Variable

Sales commissions 1,330: Period - Variable

Factory insurance 1,010: Product - MOH - fixed

Depreciation on cutting machines 2,120: Product - MOH - Fixed

Wages paid to painters 8,000:  Product - DL - Variable

two years ago, when picking flowers in the mountains back of yosemite valley, i found a book. it was blotted and storm-beaten; all of its outer pages were mealy and crumbly. the paper seemed to dissolve like the snow beneath which it had been buried, however; many of the inner pages were well preserved. and although all were more or less stained and torn, whole chapters were easily readable. this is the condition of the great open book of yosemite glaciers today; its granite pages have been torn and blurred by the same storms that wasted the castaway book.

two years ago, when picking flowers in the mountains back of yosemite valley; i found a book. it was blotted and storm-beaten, all of its outer pages were mealy and crumbly. the paper seemed to dissolve like the snow beneath which it had been buried, however, many of the inner pages were well preserved. and although all were more or less stained and torn; whole chapters were easily readable. this is the condition of the great open book of yosemite glaciers today, its granite pages have been torn and blurred by the same storms that wasted the castaway book.