Question

each of the following costs pertains to bailey dairy products company, a dairy processing company. classify each of the company’s costs as a period cost or a product cost. further classify product costs as either direct material (dm), direct labor (dl), or manufacturing overhead (moh). (if the cost is a period cost, leave the classification input field empty; do not select a label.)

cost | period cost or product cost | dm, dl or moh

1. television advertisements for bailey’s products | |
2. lubricants used in running bottling machines | |
3. research and development related to elimination of antibiotic residues in milk | |
4. gasoline used to operate refrigerated trucks delivering finished dairy products to grocery stores | |
5. company president’s annual bonus | |

Explanation:

1. Television advertisements are selling expenses, a type of period cost with no direct link to production.
2. Lubricants for bottling machines are indirect production supplies, part of manufacturing overhead (a product cost).
3. Research and development costs are administrative/non-production period costs.
4. Gasoline for delivery trucks is a distribution expense, a period cost related to finished goods delivery, not production.
5. The president's bonus is an administrative expense, a period cost not tied to production activities.

Answer:

1. Television advertisements for Bailey's products: Period Cost, (no DM/DL/MOH classification)
2. Lubricants used in running bottling machines: Product Cost, MOH
3. Research and development related to elimination of antibiotic residues in milk: Period Cost, (no DM/DL/MOH classification)
4. Gasoline used to operate refrigerated trucks delivering finished dairy products to grocery stores: Period Cost, (no DM/DL/MOH classification)
5. Company president's annual bonus: Period Cost, (no DM/DL/MOH classification)