Wages of assembly workers 3. Classify each cost and its amount as (a) either variable or fixed and (b) either product or period. The fixed cost classification does not change because property taxes do not change based on production output. Janitors 3. The property's assessed value is essentially how much it's worth for tax purposes but not necessarily the price for which you'd be able to sell the property if it were on the market right now. Also, determine if the cost is a direct product cost, indirect product cost, or period cost. E. Sales commissions. Product Cost is the cost which can be directly assigned to the product. If you are paying R5 000 per year for financials and submitting of tax returns, then one should compare these costs to the transfer fees. Thomason holds a Bachelor and Master of Science in accounting. Property taxes are placed on the tax roll in the form of a rate per $1,000 of assessed value. The company has the following information: Indirect materials used in products: $6,400, Depreciation on delivery equipment: $10,200, Labor costs of assembly line workers: $110,000. Property taxes are decided based on two factors: the property's assessed value and your local property tax rate, which is called a mill levy. Accountants can debit a prepaid tax accountant credit cash when paying property taxes. 5 Answers; Answer added by SALIK RAFIQUE, Assistant Manager Finance , Rajco Industries For a manufacturing company, which of the following is an example of a period cost rather than a product cost? He is the author of CPA Exam For Dummies. Think of it like this: If you stop production for a month, no product costs … Expert Answer 100% (1 rating) Previous question Next question Transcribed Image Text from this Question. Property taxes on corporate headquarters. (The first cost is completed as an example.) Factory utilities: $39,000. The relatively small size of the rural tax base: The rural tax base will always be comparatively small in comparison with the urban tax base. Indirect materials- $6,400 = product. Its "Tampon Tax" initiative is working to end the sales taxes … No Yes b. Chapter 1 True/False Questions ACTG 213 Direct material costs are generally variable costs true Property taxes and insurance premiums paid on a factory building are examples of manufacturing overhead true Manufacturing overhead combined with direct materials is known as conversion cost. Property taxes on a factory building are an element of: a) product cost b) period costs c) manufacturing overhead d) both a and c e) both b and c Product costs include all the direct and indirect costs of producing a product. Copyright 2020 Leaf Group Ltd. / Leaf Group Media, All Rights Reserved. What other people would we need? Only property taxes relating to a company’s production facilities have inclusion into manufacturing overhead. In most cases, the taxes for operations are the permanent rate limits certified by the districts. a. Period Cost? Fixed cost Period cost. Product costs are those costs assigned to an inventory account that eventually become part of cost of goods sold. Question: Property Taxes On A Manufacturing Plant Are An Element Of A Product Cost Period Cost Oo Oo No NO Yes Yes. The indirect materials used in the product are a variable overhead cost. Cost of Sanitary Products. Accountants will allocate manufacturing overhead to all items produced during a certain period. Property taxes represent a fixed cost to businesses. Yes Yes c. No Yes d. No No 135. Property taxes on office building- 970 = period Product costs are all manufacturing costs used to make the product and fall into the broad categories of direct materials, direct labor, variable overhead, and fixed overhead. The key difference between product costs and period costs is that product costs are only incurred if products are acquired or produced, and period costs are associated with the passage of time. A property valued at €210.000 falls into the band "€200.001 - €250.000" If you have selected the "Over €1 million" band then enter the value of your property into the "Valuation of your property" field; The total amount of LPT due on your property will be displayed More information on Local Property Tax The importance of property tax in rural areas is of local significance. B) opportunity cost. Product costs are included in the cost of a product. Period costs are expensed in the period incurred and not matched with product revenue. These are a few of the menstrual hygiene items most women buy every month to survive one menstrual cycle. Depreciation on delivery trucks and sales commissions. She is a licensed CPA in Minnesota and is a member of the State Board of Accountancy. "Cost Management: Strategies for Business Decisions"; Ronald Hilton, et al. Answer. Show transcribed image text. For a manufacturing company, theses costs usually consist of direct materials, direct labor, and manufacturing overhead. Accounting staff salaries 5. B) General, selling, and administrative costs are always expensed when paid. The other product costs are materials used in products, labor costs of assembly line workers, factory supplies used, property taxes on the factory, and factory utilities. The list is endless – tampons, menstrual cups, sanitary pads, panty liners, period panties. Manufacturing equipment depreciation. Wiki User Answered . Product Cost is based on volume because they remain same in the unit price, but differ in the total value. Property taxes on factory 4. Mechanics to keep the machinery … Product Costs. Kenneth has worked as a CPA, Auditor, Tax Preparer, and College Professor. Drivers salaries- 11,500 = product. Those that doesn't, should be considered as period cost. This classification is usually used for financial accounting purposes. Kenneth Boyd is the owner of St. Louis Test Preparation (www.stltest.net). Upvote (1) Views (1477) Followers (0) Write an Answer Register now or log in to answer. Asked by Wiki User. A) Product costs incurred during the period will initially appear as inventory on the balance sheet. Top Answer. Depreciation on delivery trucks and sales commissions. On the contrary, Period Cost is just opposite to product cost, as they are not related to production, they cannot be apportioned to the product, as it is charged to the period in which they arise. Examples of manufacturing product costs are raw materials used, direct … Repairs on office equipment: $1,800. D. Electrical costs to light the production facility. The tax on pads and tampons is a tax on being a woman, plain and simple. Product costs are the direct costs involved in producing a product. In most cases, however, property taxes will remain the same each year. An operating expense, operating expenditure, operational expense, operational expenditure or opex is an ongoing cost for running a product, business, or system. Already, more women live under the poverty line than men, and the sales tax on menstrual products is an unnecessary obstacle for people seeking healthcare products that they need – plus, it’s just plain unfair. Depreciation on administration furniture calculated using the double ... Property tax expense. Product Cost is the cost that is attributable to the product, i.e. Advertising- 2,600 = period. If you need more practice on this and other topics from your accounting course, visit Dummies.com to purchase Accounting For Dummies! Featuring the latest information on accounting methods and standards, the information in Accounting For Dummies is valuable for anyone studying or working in the fields of accounting or finance. A brief explanation of product costs and period costs is given below: Product costs: Product costs (also known as inventoriable costs) are those costs that are incurred to acquire or manufacture a product. Product Costs versus Period Costs — Practice Questions, 1,001 Accounting Practice Problems For Dummies Cheat Sheet. This problem has been solved! Period costs, on the other hand, are expensed immediately when they’re incurred. Maintenance costs of factory machines consider period cost or product cost? C) Product costs may be divided between the balance sheet and income statement. Let’s look at a travel coffee mug (this is actually my travel mug which I bring to work each morning). In summary, product costs (direct materials, direct labor and overhead) are not expensed until the item is sold when the product costs are recorded as cost of goods sold. Product costs are needed to produce the product and are sometimes referred to as inventory costs as they are included in the cost of inventory of the business until the products are sold. Determine the total amount of product costs. This is an unavoidable cost with getting your period. Selling and administrative expenses are period costs. C. Direct materials costs. B. Expenses on an income statement are considered product or period costs. Cost by Behavior Cost by Function Product Costs Variable Fixed Period $ 20,000 1. The Period Equity nonprofit campaign is working to ensure accessible menstrual products, safety and affordability. ; 2006. Accountants record period expenses on the income statement in which they occur. Determine the total amount of (a) delivery service (product) costs and (b) period costs. Dispatcher’s salary- 5,600 = product. The taxes typically remain the same and only change if the associated property or facility increases in value. false All costs incurred in a merchandising firm are considered to be period costs. Period Cost is the cost which relates to a particular accounting period. 7 8 9. Its counterpart, a capital expenditure (capex), is the cost of developing or providing non-consumable parts for the product or system. Kirk Thomason began writing in 2011. The benefits to the national economy are indirect. Period products also aren’t able to be written off on annual taxes, whereas people can write off the mortgage on their home (or their second home) and even get a tax break for buying a jet (yes, really), it seems absurd that I can’t write off a pair of period underwear like THINX. In the following practice questions, you’re asked to separate period costs from product costs for one company, and then to tally up product costs for another. Product Cost? Determine the total amount of product costs. Defining costs is an important step in managerial accounting. The taxes typically remain the same and only change if the associated property or facility increases in value. Product costs are needed to produce the product and are sometimes referred to as inventory costs as they are included in the cost of inventory of the business until the products are sold. They use this classification because numerous products may go through the company’s production process, and accountants cannot attribute property taxes to one type of batch of produced goods. If a property is kept for 10 years or longer in the entity’s name, you will pay a minimum R50 000 in accounting fees. Answers and explanations. If the tax is not paid within a specified period of time (including additional interest, penalties, and costs), a tax sale is held, which may result in either 1) the actual sale of a property, or 2) a lien sold to a third party, who (after another specified period of time) may take action to claim the property… Product costs are always related to production, with period costs being considered indirect or overhead costs. Costs may be classified as product costs and period costs. Depreciation on factory equipment b. Property taxes on store: If the store is used for keeping raw materials for production ,then,the property taxes r period cost n will be treated as manufacturing overhead.But if the stores r used for storing finished products for sale ,then ,this period cost will be treated as selling n distribution overhead cost . Well this one is plastic so we would need plastic. See the answer. Product costs are always related to production, with period costs being considered indirect or overhead costs. Variable cost Direct product cost. Companies can use the prepaid tax account and monthly recognition entries previously discussed to post these items in the company’s general ledger. Property taxes are a major source of income for local and state governments and are used to fund services such as education, transportation, emergency, parks, recreation, and libraries. These costs become expenses when the product is sold. Which of the following costs would be considered a period rather than a product cost in a manufacturing company? Period Cost - Advertising, Property tax, Office supplies, CEO, Office utilities, Office repairs Start studying Product Cost or Period Cost?. Cloud State University since 1986, after earning her PhD from Texas A & M University. Property taxes represent a fixed cost to businesses. When a district certified a dollar amount tax levy, such as a local option tax or bond tax, the assessor must calculate a tax … In calculating product costs, you include only manufacturing costs and not other costs. This entry debits manufacturing overhead and credits prepaid tax, moving the current period’s property tax amount into the cost allocation process. A period cost is any cost that cannot be capitalized into prepaid expenses, inventory, or fixed assets.A period cost is more closely associated with the passage of time than with a transactional event.Since a period cost is essentially always charged to expense at once, it may more appropriately be called a period expense. Cost Accounting. He provides online tutoring in accounting and finance. Product cost is that cost which is allocated to product and without which product cannot be manufactured while period cost must be incurred even there is no production in fiscal year. Period costs are expensed in the period incurred and not matched with product … In addition to years of corporate accounting experience, he teaches online accounting courses for two universities. Are property taxes on buildings a period cost or a production cost? Kate Mooney has been teaching accounting to both undergraduates and MBA students at St. A. Cloud Glasses Company sells glasses that protect the wearer from supposedly dangerous ultra-blue rays emitted by clouds. For a manufacturing […] Wages of salespersons c. Wages of machine operators d. Required 1. Thus, a business that has no production or inventory purchasing activities will incur no product costs, but will still incur period costs. A period cost is charged to expense in the period incurred. A brief explanation of product costs and period costs is given below: Product costs: Product costs (also known as inventoriable costs) are those costs that are incurred to acquire or manufacture a product. Plastic for casing 2. Period costs are selling and administrative expenses, not related to creating a product, that are shown in the income statement along with cost of goods sold. Costs which are needed to produce a product are referred to as product costs, all other costs are known as period costs. We would also need people to operate the machines that mold the plastic. All these costs relate to the product, here a Service. 1) Property taxes on a company's factory building would be classified as a(n): A) product cost. Product Costs. Product Cost - Indirect matl, drivers' salaries, deprec on delivery eqpt, dispatcher's salary, delivery eqpt repairs, gas & oil. It’s sexism in the way our state runs. The fixed cost classification does not change because property taxes do not change based on production output. Accountants place property tax figures into the company’s manufacturing overhead account. Property tax in most countries is much less than this theoretical ceiling. Each month, accountants will recognize a portion of the taxes by way of a second entry. These issues are described and illustrated below: Drawing a line between manufacturing costs and non-manufacturing operating costs: The key difference here is that manufacturing costs are categorized as product costs, whereas non-manufacturing operating costs are categorized as period costs. Delivery equipment repairs- 490 = product. Property taxes for office buildings or sales offices are a period expense. Question added by Deleted user Date Posted: 2013/06/21. Property taxes are just one common cost in manufacturing businesses. the cost which is traceable to the product and is a part of inventory values. Learn vocabulary, terms, and more with flashcards, games, and other study tools. Gas and oil for delivery trucks 2,800 Repairs on office equipment 260. Period costs are all costs not included in product costs and are not directly tied to the production process. Property taxes on office building 960 Office supplies 740. Which of the items recorded or paid is a period cost? Depreciation on delivery equipment- 12,200 = product. What do we need to make a travel mug? Answer to: Property taxes on a manufacturing plant are an element of a: Product Cost Period Cost a. The purpose of managerial accounting is to calculate variable, fixed and manufacturing overhead costs and then allocate the costs to produced products. You should compare this cost with the tax saving and the legal transfer fees! Property taxes on the factory: $45,000. Yes No b. Companies that produce goods often have extensive managerial accounting processes. Property taxes on a manufacturing plant are an element of a Product Cost Period Cost a. C) period cost. Companies typically pay property taxes once a year. Happy Birds Wild Bird Feeders records depreciation on delivery trucks and pays for the following items: Nails and glue used in construction of the feeders. 1. Costs which are needed to produce a product are referred to as product costs, all other costs are known as period costs. This will result in a prepaid cost that the company cannot recognize when paid. Terms in this set (15) Shoelaces for a shoe manufacturer. CEO's salary 12,400 Office utilities 1,080. In most cases, however, property taxes will remain the same each year. Supervisors 2.