Classifying costs: Product or SG&A cost; asset or expense Required Use the following format to classify each
Question:
Required
Use the following format to classify each cost as a product cost or a selling, general, and administrative (SG&A) cost. Also indicate whether the cost would be recorded as an asset or an expense. The first item is shown as anexample.
Cost Category Utilities used in manufacturing facility Cars for sales staff Real estate tax levied on a factory General office supplies Raw materials used in the manufacturing process Cost to rent office equipment Wages of production workers Advertising costs Promotion costs Production supplies Depreciation on administration building Depreciation on manufacturing equipment Research and development costs Cost to set up manufacturing equipment Product/SG&A Asset/Expense Product Asset
Step by Step Answer:
Cost Category Product SGA Asset Expense Utilities used in a manuf...View the full answer
Fundamental Managerial Accounting Concepts
ISBN: 978-0078025655
7th edition
Authors: Thomas Edmonds, Christopher Edmonds, Bor Yi Tsay, Philip Old
Related Video
Depreciation of non-current assets is the process of allocating the cost of the asset over its useful life. The cost of the asset includes the purchase price, any additional costs incurred to bring the asset to its current condition and location, and any other costs that are directly attributable to the asset. The useful life of the asset is the period over which the asset is expected to be used by the company. To calculate the depreciation, companies use different methods such as straight-line, declining-balance, sum-of-the-years\'-digits, units-of-production, and group depreciation. The chosen method will depend on the type of asset, the company\'s accounting policies, and the accounting standards that are applicable. The straight-line method allocates an equal amount of the asset\'s cost over its useful life, while the declining-balance method calculates depreciation at a fixed rate, typically double the straight-line rate, but the amount of depreciation decreases over time. The sum-of-the-years\'-digits method is similar to the declining-balance method, but the rate of depreciation is calculated using a fraction that is based on the useful life of the asset. It\'s important to note that the depreciation expense will be recorded on the company\'s income statement and the accumulated depreciation will be recorded on the company\'s balance sheet. This will decrease the value of the asset on the balance sheet over time.
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