Classification of Costs and Income Statement
Felix's Fine Jewelry produces fine jewelry for department stores. The following costs incurred by the company may be classified as direct materials, direct labor, manufacturing overhead, or period costs.
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a.
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Wages paid to Jewelry workers
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$ 1,200,000
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b.
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Utilities in the administrative area
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300,000
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c.
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Depreciation on chain linking machinery utilized in the plant
|
200,000
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d.
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Silver, gold, and gemstones used in producing necklaces
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4,000,000
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e.
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Company attorney's salary
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150,000
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f.
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Lease rental charge on forklift for material and finished goods handling
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10,000
|
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g.
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Telephone expense for customer service office
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20,000
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h.
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Wages of plant heating and cooling technicians
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100,000
|
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i.
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Utilities for the assembly area of the plant
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250,000
|
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j.
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Maintenance on computers utilized in the administrative assistant's office
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1,500
|
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k.
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Salary paid to the CEO
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200,000
|
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l.
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Fine paid for introducing cyanide into the local water supply
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1,000,000
|
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m.
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Signature red jewelry boxes used for packaging
|
50,000
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n.
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Expedited freight of product to major customer
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50,000
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Instructions:
Classify the costs and total by classification. Assume Felix's Fine Jewelry's revenue for the period was $8,000,000 and there is no change in ending inventory. Prepare an operating income statement that shows the deductions of expense in terms of total classification by category: direct materials, direct labor, manufacturing overhead, or period costs.