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Question(s) / Instruction(s):

Ace Company makes and sells a product and incurs the costs identified below to make and sell the product.

Requirement: 1

Classify each of these costs as product or period, prime or conversion, and fixed or variable.

Component parts

Labor to assemble the parts

Lease payments on a machine used to assemble the parts

Rent for a building where the units are assembled

Insurance for a building where the units are assembled

Utilities for a building where the units are assembled

Sales commissions

Shipping expenses

General administrative expenses

Requirement 2:

Define the following terms:

a)            Product Cost

b)            Period Cost

c)            Prime Costs

d)            Conversion Costs

e)            Fixed Costs

f)             Variable Costs

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