LINK TO TEXT LINK TO TEXT Knight Company reports the followi

LINK TO TEXT

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Knight Company reports the following costs and expenses in May. Factory utilities $15,500 Direct labor $69,100 Depreciation on factory equipment 12,650 Sales salaries 46,400 Depreciation on delivery trucks 3,800 Property taxes on factory building 2,500 Indirect factory labor 48,900 Repairs to office equipment 1,300 Indirect materials 80,800 Factory repairs 2,000 Direct materials used 137,600 Advertising 15,000 Factory manager’s salary 8,000 Office supplies used 2,640 From the information:

Solution

1. MANUFACTURING OVERHEAD

Note - Depreciation on delivery truck is a part of selling and distribution expense therefore not considered in above table. Repair and supplies of office are Administrative overhead.

2. PRODUCT COST - Cost incurred in production of a product. It includes direct labor, direct materials & factory overhead.

3. PERIOD COST - These are cost which are associated with the passage of time. Cost other then product cost are period cost.

Note- Costs which are included in inventory (Direct Material, Direct Labour, Production overhead) , Fixed Assest are not included in Period Costs.