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Tutorial 14228

A manufacturing company prepays its insurance coverage for a three-year period. The premium for the three years is $2,700 and is paid at the beginning...

Question:

A manufacturing company prepays its insurance coverage for a three-year period. The premium for the three years is $2,700 and is paid at the beginning of the first year. Eighty percent of the premium applies to manufacturing operations and 20% applies to selling and administrative activities. What amounts should be considered product and period costs respectively for the first year of coverage?

Product                Period

A)           $2,700                   $0

B)            $2,160                   $540

C)            $1,440                   $360

D)           $720                       $180

a)            Option A

b)            Option B

c)            Option C

d)            Option D

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