The Sharpe Company reports the following information for 2012: Sales $76,500 Direct materials used 7,300 Depreciation on factory equipment 4,700 Indirect labor 5,900 Direct labor 10,500 Factory rent 4,200 Factory utilities 1,200 Sales salaries expense 15,600 Office salaries expense 8,900 Indirect materials 1,200 Compute: a) product costs b) period costs

Product Cost = $35,000

Period Cost = $101,000

Explanation:

Given

Sales $76,500

Direct materials used 7,300 Depreciation on factory equipment 4,700

Indirect labor 5,900

Direct labor 10,500

Factory rent 4,200

Factory utilities 1,200

Sales salaries expense 15,600

Office salaries expense 8,900 Indirect materials 1,200

Product cost refers to the costs incurred to create a product.

From the given data; the product cost will be calculated by the summation of the following:

Direct materials used 7,300 Depreciation on factory equipment 4,700

Indirect labor 5,900

Direct labor 10,500

Factory rent 4,200

Factory utilities 1,200

Indirect materials 1,200

So, Product Cost = 7,300 + 4,700 + 5,900 + 10,500 + 4,200 + 1,200 + 1,200

Product Cost = $35,000

Period Cost is any cost that cannot be capitalized into prepaid expenses, inventory, or fixed assets.

From the given data; the period cost will be calculated by the summation of the following:

Sales $76,500

Sales salaries expense 15,600

Office salaries expense 8,900

Period Cost = $76,500 + $15,600 + $8,900

Period Cost = $101,000

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