Indicate for each of the following costs whether it is a...

Indicate for each of the following costs whether it is a product cost or a period cost. 1. Wages of aircraft mechanics employed by an airline. 2. Wages of drill-press operators in a manufacturing plant. 3. Cost of food in a microwavable dinner. 4. Cost incurred by a department store chain to transport merchandise to its stores. 5. Cost of grapes purchased by a winery. 6. Depreciation on pizza ovens in a pizza restaurant. 7. Cost of plant manager in a computer production facility. 8. Wages of security personnel in a department store. 9. Cost of utilities in a manufacturing facility.

Transcript

00:01 Questions asking about determining if a situation is a period cost or a product cost.

00:10 I think one thing we need to remember is that product costs are directly traceable to the product.

00:45 I'm not sure if i spelled traceable right, but that's what we need to keep in mind for product costs.

00:51 Is that they're directly traceable to the product, whereas period costs can be anything.

00:59 And so when you're looking at each of these items, you need to ask yourself, can i trace that cost to the product specifically? so let's start with number one.

01:10 And that is wages of aircraft mechanics employed by an airline.

01:16 So you need to think, what's the product here? and it's an airline.

01:22 And so these mechanics are part of the process, but the product is selling airline tickets.

01:30 So can i directly trace the wages of the mechanics to a ticket? no, i can't.

01:38 If it was like the company was producing airplanes, then the mechanics ' labor is directly traceable to that product, but in this regard it's not, so it's a period cost.

01:50 Okay, number two, wages of drill press operators in a manufacturing plant.

02:01 So i think this one is more of a product cost because they are in the manufacturing plant.

02:09 So their labor hours could be traced to the product.

02:15 It could be debatable, though.

02:17 So i might put slash period.

02:22 It could be debatable depending on maybe what that manufacturing process is.

02:28 For the certain specific product, but i assume it's product.

02:34 Okay, number three is cost of food and a microwave dinner.

02:39 So that is a direct part of the product.

02:43 The microwave dinner is made up of food, the tray, and the packaging.

02:47 So food would be a product cost...