Assume that Maria Cottonwood has decided to begin production of her fire extinguisher. Her company is Blaze

Question:

Assume that Maria Cottonwood has decided to begin production of her fire extinguisher.

Her company is Blaze Be Gone, whose costs for last month follow.

Factory rent .............. $ 2,000

Company advertising ........... 500

Wages paid to assembly workers ...... 25,000

Depreciation for salespersons’ vehicles .... 1,000

Screws .................. 250

Utilities for factory ............ 800

Production supervisor’s salary ...... 4,000

Sandpaper ................ 150

President’s salary ........... 6,000

Sheet metal .............. 7,500

Paint ................. 750

Sales commissions ........... 1,700

Factory insurance ............ 2,000

Depreciation on factory machinery .... 5,000

Wages paid to painters .......... 5,500

Required:

1. 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).

2. Determine the total amount for each of the following:

a. Direct materials.

b. Direct labor.

c. Manufacturing overhead.

d. Prime cost.

e. Conversion cost.

f. Total product cost.

3. Explain why the depreciation on the salespersons’ vehicles is treated differently than the depreciation on the factory machines. How might this difference impact Maria’s financial statements in terms of the balance sheet and income statement?

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