Suppose that you have been given a summer job as an intern at Issac Aircams, a company that manufactures sophisticated spy cameras for remote-controlled military reconnaissance aircraft. The company, which is privately owned, has approached a bank for a loan to help it finance its growth. The bank requires financial statements before approving such a loan. You have been asked to help prepare the financial statements and were given the following list of costs:
- Depreciation on salespersons cars.
Rent on equipment used in the factory
- Lubricants used for machine maintenance
- Salaries of personnel who work in the finished goods warehouse
- Soap and paper towels used by factory workers at the end of a shift.
- Factory supervisors salaries
- Heat, water, and power consumed in the factory
- Materials used for boxing products for shipment overseas. (Unites are not normally
- Advertising cost
- Workers compensation insurance for factory employees
- Depreciation on chairs and tables in the factory lunchroom
- The wages of the receptionist in the administrative offices
- Cost of leasing the corporate jet used by the company’s executives
- The cost of renting rooms at a Florida resort for the annual sales conference
- The cost of packaging the company’s product.
Required:
Classify the above cost as either product cost or period costs for the purpose of preparing the financial statements for the bank.