Classify the costs in the items below using the following format below. Identify the right answer and put an X
Items
Direct Materials
(Product Cost)

Direct Labor
(Product Cost)

Manufacturing Overhead
(Product Cost)

Period Cost (Selling cost)
Period Cost (Administrative cost)
Opportunity Cost
Sunk Cost
Differential
Cost
CD Company is a shirt manufacturing company producing and selling different types of shirts to customers around the world. Some of their cost items are listed below:
1. Materials used in producing the shirts.
2. The threads used in sewing the shirts.
3. The labor costs for each type of shirt in the manufacturing division.
4. The factory supervisor’s salary for the manufacturing division.
5. Rent on office building.
6. The cost of equipment purchased five years ago which is no longer usable.
7. The cost of manufacturing buttons compared with the cost of buying them from external supplier.
8. The rent foregone due to the decision to use the factory space rather than renting it.
9. The sales commission paid to the salespeople.
10. Depreciation on equipment used to manufacture the shirts.
11. Heat, water and power used in the factory.
12. The salary of the accountant
13. The lease cost of the building which is used for administrative and manufacturing purpose.
14. The boxes which are used to package the shirts.
15. The cost of shipping the boxes of shirts to the customers.

2. The following data have been taken from the accounting records of YZ Company for the month ending 30th September 2020
Sales
$ 800,000
Cost of goods sold
$ 200,000
Sales commission
($1000 per month plus 5% of sales)
Administrative expenses (2/3 variable and 1/3 fixed)
$30000
Depreciation of office equipment
$200 per month
Executive salaries: 50% fluctuates with sales and the rest is fixed.
$ 12000
Insurance expense
$300 per month
Clerical costs
$1000 per month plus $20 per unit sold
Delivery expense
$20 per unit sold
Utilities expense (30% variable and 70% fixed)
$5500
Miscellaneous expenses
$ 500 per month plus 1% of sales
Selling price per unit
$500

Instructions:
1. Using the information provided above prepare an income statement for the month of September using the Traditional Format where costs are organized by function.

2. Prepare an income statement for the month of September using the Contribution Format where costs are organized by behavior.

Answer rating: 100% (QA)

Solution 1 Classification of costs SNo Particulars Cost 1 Material used in producing the shirts Direct Material 2 The threads used in sewing the shirt... View the full answer