Period Costing Question

[azhtey]

Does period costing only involve costs in getting the goods ready to sell that cannot be easily allocated or also inclusive of selling expenses.

e.g.
Advertising costs - can they be classified as "Period costs"

[AppleXY]

NO! Selling expenses are neither period or product costs. Product and Period Costs are buying costs, i.e. costs in order to bring the stock into a location and position ready for sale.

Period costing really comes into effect, where additional costs had 2 or more items. It is illogical to allocate them to  individual line of stock.

So, in this case advertising is not a period cost. Instead it is an other expense

[azhtey]

legend, and my future accountant

[joechan521]

NO! Selling expenses are neither period or product costs. Product and Period Costs are buying costs, i.e. costs in order to bring the stock into a location and position ready for sale.

Period costing really comes into effect, where additional costs had 2 or more items. It is illogical to allocate them to  individual line of stock.

So, in this case advertising is not a period cost. Instead it is an other expense

what if sometimes the advertising was directly focused on that line of stock. for example

    Collin plans to introduce a new type of tent. Purchases will be made in lots of approximately 50 units from an existing supplier
Other details are:
                     $
?   Selling Price (per unit)            800 + $80 GST
?   Suppliers invoice price (per unit)      460
?   Waterproofing of tents before sale (per unit)     30
?   Advertising costs for new tent (per 50 units)   600

?   Packaging costs before sale (per unit)        10
?   Delivery out (optional) (per unit)        15

what would the advertising be in this case?

this is from the sample exam isn't it.

 Yeah, it is not treated as a product nor period cost as it isn't a buying expense. Rather, it is a selling one where the owner can fully opt to do or not, it is not required to bring the stock into the condition and location ready for sale.

[Paulie]

what would the advertising be in this case?

Advertising is an other expense as it doesn't get the good ready for sale. For it to be even counted as a product OR period cost it needs to do that, and advertising doesn't. I think the only time you consider the advertising cost is when you are working out NRV.

That really didn't turn out as clear as I wanted but yeah. If I'm wrong please correct me! Knowing before tomorrow before I make the mistake would be good .

[joechan521]

what would the advertising be in this case?

Advertising is an other expense as it doesn't get the good ready for sale. For it to be even counted as a product OR period cost it needs to do that, and advertising doesn't. I think the only time you consider the advertising cost is when you are working out NRV.

That really didn't turn out as clear as I wanted but yeah. If I'm wrong please correct me! Knowing before tomorrow before I make the mistake would be good .

thanks, that cleared things for me, i'll ask u when i have more questions

[AppleXY]

NO! Selling expenses are neither period or product costs. Product and Period Costs are buying costs, i.e. costs in order to bring the stock into a location and position ready for sale.

Period costing really comes into effect, where additional costs had 2 or more items. It is illogical to allocate them to  individual line of stock.

So, in this case advertising is not a period cost. Instead it is an other expense

what if sometimes the advertising was directly focused on that line of stock. for example

    Collin plans to introduce a new type of tent. Purchases will be made in lots of approximately 50 units from an existing supplier
Other details are:
                     $
?   Selling Price (per unit)            800 + $80 GST
?   Suppliers invoice price (per unit)      460
?   Waterproofing of tents before sale (per unit)     30
?   Advertising costs for new tent (per 50 units)   600

?   Packaging costs before sale (per unit)        10
?   Delivery out (optional) (per unit)        15

what would the advertising be in this case?

this is from the sample exam isn't it.

 Yeah, it is not treated as a product nor period cost as it isn't a buying expense. Rather, it is a selling one where the owner can fully opt to do or not, it is not required to bring the stock into the condition and location ready for sale.

[Collin Li]

for example

    Collin plans to introduce a new type of tent. Purchases will be made in lots of approximately 50 units from an existing supplier

Why me?

[joechan521]

i got another question,
when doing budgets
whilst some stock is purchased on credit, but theres a customs duty expense, does that mean customs duty is paid on credit too?

what about other periodic costs that was paid to the supplier such as delivery. or there isn't any delivery cost when paying cash??

i hope my questions made sense....im so confused

[joechan521]

one more question,
when it asked the effect on the accounting equation after a transaction.
and the transaction involved gst.
example a sales return
dr sales return
dr gst
cr debtors control
dr stock control
cr cost of sales


do i account the gst as a decrease in liability or an increase in asset?
cos it will end up with different effect on the accounting equation

[123321]

you must never forget the subsidiary debtor recording!
DR sales returns
DR GST
CR debtors control
CR(subsidiary ledger) debtor- I.M. Shiftee
DR stock control
CR cost of sales

the gst is a reduction in liability, it is not an increase in assets as it is usually a liability.

hope that helps, remember, sales returns>6 entries, purchases returns>4 entries

[joechan521]

ohohoh, yeah i forgot! i always forget about that ><

what if it was a purchase
u received gst when u buy
would that be increase in asset or decrease in liability??

and does it matter whether the previous balance of gst clearing was dr or cr??