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5 March, 09:02

EA4.

LO 2.2Hicks Contracting collects and analyzes cost data in order to track the cost of installing decks on new home construction jobs. The following are some of the costs that they incur. Classify these costs as fixed or variable costs and as product or period costs.

Lumber used to construct decks ($12.00 per square foot)

Carpenter labor used to construct decks ($10 per hour)

Construction supervisor salary ($45,000 per year)

Depreciation on tools and equipment ($6,000 per year)

Selling and administrative expenses ($35,000 per year)

Rent on corporate office space ($34,000 per year)

Nails, glue, and other materials required to construct deck (varies per job)

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  1. 5 March, 12:47
    0
    There is the relation between the variable cost and the product cost & fixed cost and the period cost

    The product cost is that cost which is used to make the product. It includes direct material, direct labor, and the manufacturing overhead

    In mathematically,

    Product cost = Direct material + direct labor + manufacturing overhead

    The period cost is that cost which remain fixed and is incurred when the time passes

    Period cost = Salaries of sales person + delivery trucks depreciation + Repairs to office equipment + Advertising expense + usage of office supplies expense

    So, the categorization is shown below:

    Lumber used to construct decks ($12.00 per square foot) = Variable cost and Product cost

    Carpenter labor used to construct decks ($10 per hour) = Variable cost and Product cost

    Construction supervisor salary ($45,000 per year) = Fixed cost and the period cost

    Depreciation on tools and equipment ($6,000 per year) = Fixed cost and the period cost

    Selling and administrative expenses ($35,000 per year) = Fixed cost and the period cost

    Rent on corporate office space ($34,000 per year) = Fixed cost and the period cost

    Nails, glue, and other materials required to construct deck (varies per job) =

    Variable cost and Product cost
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