Of course, Sarah!
I'll go ahead and break down the answers for the tutorial questions based on cost
classification.
### **QUESTION 1: Classification of Costs**
For each cost item, we classify it into:
- **(a) Product or period cost**
- **(b) Variable or fixed cost**
- **(c) Manufacturing or non-manufacturing cost**
Here's how some of the costs would be classified:
| **Cost No.** | **Product or Period Cost** | **Variable or Fixed Cost** | **Manufacturing or
Non-Manufacturing Cost** |
|-------------|-------------------------|-----------------------|---------------------------|
| 1. Advertising cost of Nike | Period | Fixed | Non-Manufacturing |
| 2. Depreciation on mining machinery | Product | Fixed | Manufacturing |
| 3. Wages of assembly personnel | Product | Variable | Manufacturing |
| 4. Delivery costs on customer shipments | Period | Variable | Non-Manufacturing |
| 5. Newsprint consumed in printing | Product | Variable | Manufacturing |
| 6. Plant insurance costs | Product | Fixed | Manufacturing |
Absolutely, Sarah! Here's the full classification for **Question 1**, breaking down each cost into the
appropriate categories.
| **Cost No.** | **Product or Period Cost** | **Variable or Fixed Cost** | **Manufacturing or
Non-Manufacturing Cost** |
|-------------|-------------------------|-----------------------|---------------------------|
| 1. Advertising cost of Nike | Period | Fixed | Non-Manufacturing |
| 2. Straight-line depreciation on mining machinery of BHP Billiton | Product | Fixed | Manufacturing
|
| 3. Wages of assembly personnel of Mack Trucks | Product | Variable | Manufacturing |
| 4. Delivery costs on customer shipments of Streets ice-cream | Period | Variable | Non-
Manufacturing |
| 5. Newsprint consumed in printing The Sydney Morning Herald | Product | Variable |
Manufacturing |
| 6. Plant insurance costs of Levi Strauss | Product | Fixed | Manufacturing |
| 7. Glass costs incurred in cookware produced by Pyrex | Product | Variable | Manufacturing |
| 8. Tyre costs incurred by Subaru | Product | Variable | Manufacturing |
| 9. Sales commissions paid to the sales force of Dell Inc | Period | Variable | Non-Manufacturing |
| 10. Wood glue consumed in the manufacture of Fantastic Furniture wardrobes | Product | Variable
| Manufacturing |
| 11. Hourly wages of refinery security guards employed by BHP | Period | Fixed | Non-
Manufacturing |
| 12. Salary of a financial vice-president of Microsoft | Period | Fixed | Non-Manufacturing |
| 13. Handbrake pads manufactured by Malvern Star | Product | Variable | Manufacturing |
| 14. Inwards shipping costs incurred by Toshiba | Product | Variable | Manufacturing |
| 15. Oil consumed by sewing machines at Telekung Siti Khadijah | Product | Variable |
Manufacturing |
| 16. Hourly wages of cleaners at the Hospital Al-Sultan Abdullah UITM | Period | Fixed | Non-
Manufacturing |
### **QUESTION 2: Cost Classification**
Each cost item can fall under multiple classifications:
1. **Product cost** - Costs related to production.
2. **Period cost** - Costs not directly tied to production.
3. **Conversion cost** - Costs to convert raw materials into products.
4. **Prime cost** - Direct materials + direct labor.
5. **Direct material cost** - Cost of raw materials.
6. **Direct labor cost** - Wages paid to workers directly involved in production.
7. **Manufacturing cost** - Any cost incurred in production.
For example:
- **Wages of drill-press operators in a manufacturing plant** → **Product cost, Conversion cost,
Prime cost, Direct labor cost, Manufacturing cost**
- **Cost of food in frozen packaged dinner** → **Product cost, Direct material cost, Manufacturing
cost**
- **Depreciation on pizza ovens in a restaurant** → **Product cost, Manufacturing cost**
Absolutely, Sarah! Here's a complete breakdown for **Question 2**, classifying each cost into
multiple categories.
### **Question 2: Cost Classification Table**
Each cost item can fall under one or more of the following classifications:
- **Product cost (PC)** – Cost related to production.
- **Period cost (PeC)** – Cost not directly tied to production.
- **Conversion cost (CC)** – Costs that convert raw materials into finished products (Direct labor +
manufacturing overhead).
- **Prime cost (PrC)** – Direct materials + direct labor.
- **Direct material cost (DMC)** – Raw materials directly used in production.
- **Direct labor cost (DLC)** – Wages paid to workers directly involved in production.
- **Manufacturing cost (MC)** – Any cost incurred in the production process.
| **Cost No.** | **Classification** |
|-------------|---------------------|
| 1. Cost incurred by a department store chain to transport goods purchased for resale to its stores |
PeC |
| 2. Depreciation on pizza ovens in a pizza restaurant | PC, MC |
| 3. Wages of aircraft mechanics employed by an airline | PeC |
| 4. Wages of drill-press operators in a manufacturing plant | PC, CC, PrC, DLC, MC |
| 5. Cost of food in a frozen packaged dinner | PC, DMC, MC |
| 6. Salary of a plant manager in a computer production facility | PC, MC |
| 7. Wages of security personnel in a department store | PeC |
| 8. Cost of electricity and gas in a manufacturing facility | PC, MC |
| 9. Depreciation of computer used in a sales department | PeC |
| 10. Depreciation of computer used to control production equipment | PC, MC |
### **QUESTION 3: Production vs Non-Production Costs**
- **Production costs**: Costs directly tied to manufacturing.
- Example 1: Raw materials like cement.
- Example 2: Factory rental expenses.
- **Non-Production costs**: Costs unrelated to manufacturing (administrative or selling costs).
- Example 1: Administrative expenses.
- Example 2: Sales and marketing costs.
#### **Cost Computation for Tan Boong Sdn Bhd**
- **Prime costs** = Direct material cost + Direct labor cost
- Cement: RM350,000
- Salary - Production specialists: RM295,000
- **Total Prime Cost = RM645,000**
- **Production overhead** = Indirect manufacturing costs
- Factory rental: RM75,000
- Utilities (80% factory): RM48,000
- Special machine depreciation: RM10,000
- **Total Production Overhead = RM133,000**
- **Period costs** = Non-manufacturing costs
- Administrative expenses: RM35,000
- Utilities (20% administrative): RM12,000
- **Total Period Cost = RM47,000**
### **QUESTION 4: Cost Types Explanation**
1. **Direct Cost** - Costs that can be directly traced to a product (e.g., raw materials).
2. **Indirect Cost** - Costs that cannot be directly linked to a specific unit of production (e.g.,
factory rent).
3. **Conversion Cost** - Cost to convert raw materials into finished products (Direct labor +
manufacturing overhead).
#### **Cost Classification for Sour Sweet Sdn Bhd**
- **Prime cost** (Direct material + Direct labor):
- Flour: RM1,100
- Sugar: RM1,050
- Other direct materials: RM1,500
- Wages of production workers: RM6,000
- **Total Prime Cost = RM9,650 per month**
- **Fixed cost** (Costs that remain constant):
- Supervisor's salary: RM1,700
- Machinery depreciation (monthly): RM200
- Administrative expenses: RM1,500
- **Total Fixed Cost = RM3,400 per month**
