Steuben Company produces dog houses. During the current year, Steuben Company incurred the following costs: Wages paid to factory machine operators in producing the dog houses should be categorized as a:
A) product cost and recorded in the inventory account
B) period cost and recorded on the income statement
C) product cost and recorded on the income statement
D) period cost and recorded in the inventory account

Question

Steuben Company produces dog houses. During the current year, Steuben Company incurred the following costs:  Wages paid to factory machine operators in producing the dog houses should be categorized as a:
A) product cost and recorded in the inventory account 
B) period cost and recorded on the income statement 
C) product cost and recorded on the income statement 
D) period cost and recorded in the inventory account

Quizplus · Accepted Answer

Wages paid to factory machine operators in producing the dog houses are considered as direct labor cost, which is a component of manufacturing overhead and, therefore, treated as a product cost. It should be recorded in the inventory account as a cost of producing the dog houses. Period costs, which are expensed immediately, include selling, general, and administrative expenses and are recorded on the income statement.

Steuben Company Produces Dog Houses