A manufacturing company prepays its insurance coverage for a three-year period. The premium for the three years is $3,120 and is paid at the beginning of the first year. Ninety percent of the premium applies to manufacturing operations and ten percent applies to selling and administrative activities. What amounts should be considered product and period costs respectively for the first year of coverage

Answer and Explanation:

The computation of the amount of the product and period cost is shown below:

Given that

Total Payment made for Three Years = $3,120

Per Year Payment is

= $3,040 ÷ 3 years

=$1,040

Now

90% of the per year payment is allocated to manufacturing operations

= $1,040 × 90%

= $936

And, 10% is Applied to Selling and Administrative Activities

= $1,040 × 10%

= $104

So, the product and period costs for the first year of coverage are $936 and $104 respectively.

both are integral parts of a corporate balance sheet. the cash flow statement, or statement of cash flows, measures the sources of a company's cash and its uses of cash over a specific time period. the income statement measures a company's financial performance, such as revenues, expenses, profits or losses over a specific time period (in fact, it's sometimes called a statement of financial performance).

a cash flow statement shows exactly how much money a company has received and how much it has spent, traditionally over a period of one month. it captures the current operating results and changes on the balance sheet, such as increases or decreases in accounts receivable or accounts payable, and does not include noncash accounting items such as depreciation and amortization. the cash flow generally comes from revenue received as a result of business activity, but it may be augmented by funds available as a result of credit. a cash flow statement is used to determine the short-term viability and liquidity of a company, specifically how well it is positioned to pay its bills and vendors.