ACCT 2121 PAL Session Chapter 10 11/13

Classify the following costs incurred by Randy’s Tractors ( a tractor company) as either product costs (direct materials, direct labor, manufacturing overhead) or period costs.

A. Labor costs of constructing each tractor is $55 per tractor.

• Direct materials

• Direct labor

• Manufacturing overhead

• Period costs

B. Material costs (iron, steel, engine, wheels) is $70 per tractor.

• Direct materials

• Direct Labor

• Manufacturing overhead

• Period costs

C. Cost of delivering tractors to customers is $20 per tractor.

• Direct Labor

• Direct Materials

• Manufacturing overhead

• Period costs

D. Depreciation on factory building used to make tractors is $30,000 a year.

• Direct Labor

• Direct Materials

• Manufacturing overhead

• Period costs

E. Salaries for the factory employees is $200,000 a year.

• Direct Labor

• Direct Materials

• Manufacturing overhead

• Period costs

F. Advertising costs $80,000 a year.

• Direct Materials

• Direct Labor

• Manufacturing overhead

• Period costs

H. Property taxes on the factory building is $10,000 a year.

• Direct Materials

• Direct Labor

• Manufacturing overhead

• Period costs

Sales employees get a $15 commission for each tractor sale they make.

• Direct Materials

• Direct Labor

• Manufacturing overhead

• Period costs

If we assume Randy’s Tractors sold 7,000 tractors this year, determine their total manufacturing costs (Product costs).

A. Labor costs of constructing each tractor is $55 per tractor.

B. Material costs (iron, steel, engine, wheels) is $70 per tractor.

C. Cost of delivering tractors to customers is $20 per tractor.

D. Depreciation on factory building used to make tractors is $30,000 a year.

E. Salaries for the factory employees is $200,000 a year.

F. Advertising costs $80,000 a year.

H. Property taxes on the factory building is $10,000 a year.

I. Sales employees get a $15 commission for each tractor sale they make.

• $795,000

• $1,115,000

• $1,265,000

• $945,000

BOBS Corporation has a beginning inventory of $200,000 for raw materials. They have purchased $740,000 of raw materials during the year. The total raw materials available for use is:

• $790,000

• $600,000

• $540,000

• $940,000