Suppose that you have been given a summer job at Fairwings Avionics, a company that manufactures

Suppose that you have been given a summer job at Fairwings Avionics, a company that manufactures sophisticated radar sets for commercial aircraft. The company, which is privately owned, has approached a bank for a loan to help finance its tremendous growth. The bank requires financial statements before approving such a loan.

Required:

Classify each cost listed below as either a product cost or a period cost for purposes of preparing the financial statements for the bank.

	Costs	Product/Period
1.	The cost of the memory chips used in a radar set.	Product cost
2.	Factory heating costs.	Product cost
3.	Factory equipment maintenance costs.	Product cost
4.	Training costs for new administrative employees.	Period cost
5.	The cost of the solder that is used in assembling the radar sets.	Product cost
6.	The travel costs of the company’s salespersons.	Period cost
7.	Wages and salaries of factory security personnel.	Product cost
8.	The cost of air-conditioning executive offices.	Period cost
9.	Wages and salaries in the department that handles billing customers.	Period cost
10.	Depreciation on the equipment in the fitness room used by factory workers.	Product cost
11.	Telephone expenses incurred by factory management.	Product cost
12.	The costs of shipping completed radar sets to customers.	Period cost
13.	The wages of the workers who assemble the radar sets.	Product cost
14.	The president’s salary.	Period cost
15.	Health insurance premiums for factory personnel.	Product cost

Seth’s Skateboard Company has provided the following information about its company. Required: For each of the following costs, choose "Yes" or "No" to indicate the category of product cost (or period cost) and whether it is a prime cost, conversion cost, both, or neither.

Seth’s Skateboard Company has provided the following information about its company.

Required:

For each of the following costs, choose "Yes" or "No" to indicate the category of product cost (or period cost) and whether it is a prime cost, conversion cost, both, or neither.

	Product Cost
	Direct Materials	Direct Labor	Manufacturing Overhead	Period Cost	Prime Cost	Conversion Cost
Production supervisor   salary	No	No	Yes	No	No	Yes
Cost of fiberglass	Yes	No	No	No	Yes	No
Wages of assembly   person	No	Yes	No	No	Yes	Yes
Sales commission	No	No	No	Yes	No	No
Cost of high-grade   wheels	Yes	No	No	No	Yes	No
Screws	No	No	Yes	No	No	Yes
Factory rent	No	No	Yes	No	No	Yes
Wages of skateboard   painter	No	Yes	No	No	Yes	Yes
Factory utilities	No	No	Yes	No	No	Yes
Utilities for corporate   office	No	No	No	Yes	No	No