ACC 231
Chapter 2
Assignment
Ying Chang
After reading Chapter 2:
•Answer the questions below.
•Your answers should be typed and saved as a Word document (.doc). Please use
proper grammar and run a spell check on your document. Answer the questions in
complete sentences and / or paragraphs.
•Please submit your document at class time on September 15.
QUESTIONS
1. Name and define 3 types of manufacturing costs.
Direct materials is materials that can be identified directly with the product at reasonable
cost.
Direct labor is labor that be identified directly with the product at reasonable cost.
Manufacturing overhead is all production costs except those for direct labor and direct
material.
2. Name 2 types of non-manufacturing costs.
Marketing costs is costs required to obtain customer orders and provide customers with
finished products, including advertising, sales commissions, and shipping costs.
Administrative costs is costs required to manage the organization and provide staff
support, including executive salaries; costs of data processing, and legal costs.
3. Explain the difference between product costs and period costs.
Product costs are those costs assigned to units of production and recognized (expensed)
when the product is sold. Product costs follow the products through inventory. Such costs
are incurred on manufacturing process either directly as material and labor costs or
indirectly as overheads. Examples of products costs are raw material, labor.
Periods costs (nonmanufacturing costs) include all other costs and are expensed as they are
incurred. Example of period costs are advertising, sales commissions, office supplies, legal
and research.
4. When are product costs expensed on the Income Statement?
