Question

Identify the following costs as a product cost or a period cost for a magazine publisher: a. Sales salaries b. Paper used for the magazine c. Maintenance on printing machines d. Depreciation expense—corporate headquarters

Answer 1

Answer and explanation:

Product costs are those that are linked to the manufacturing of a good such as direct materials, direct labor, and overhead. Period costs are not involved directly in the manufacturing process but are important for the business. Examples of period costs are administrative wages, sales commissions, or depreciation. Thus:

A) Sales salaries (Period Costs)

B) Paper used for the magazine (Product Cost)

C) Maintenance on printing machines (Product Cost)

D) Depreciation expense-corporate headquarters (Period Cost)