Is the depreciation of delivery trucks a period cost or is it manufacturing overhead?

The depreciation on the trucks used to deliver products to customers is a period cost. The depreciation on delivery trucks will be reported as an expense on the income statement in the period in which it occurs. It might be reported as part of Selling Expenses or as part of Selling, General and Administrative (SG&A) Expenses.

The depreciation on the trucks used to transport materials or work-in-process between the facilities of a manufacturer is a component of manufacturing overhead. In other words, the depreciation on trucks used in the manufacturing process is assigned to the goods produced rather than being expensed directly.

Learn more about Manufacturing Overhead.

About the Author: Harold Averkamp (CPA) has worked as an accountant, consultant, and university accounting instructor for more than 25 years.

He is the author of the 2010 Master Accounting Download Package which has been praised for it's ability to simplify accounting in a way that anybody can understand.

View the original article here

Is a manufacturer’s product warranty part of its manufacturing overhead or is it part of its SG&A expense?

The costs associated with a manufacturer’s product warranty are part of its selling expenses and therefore part of its SG&A expenses.

If the future costs of the warranty coverage are probable and can be estimated, they are recorded at the time of the sale. The accounting entry will debit Warranty Expense and will credit Warranty Liability. If the estimated warranty costs are recorded at  the time of the sale, the actual costs of the repair work or the replacement of the product during the warranty period will be debited to the Warranty Liability account—thereby reducing the liability balance.

About the Author: Harold Averkamp (CPA) has worked as an accountant, consultant, and university accounting instructor for more than 25 years.

He is the author of the 2010 Master Accounting Download Package which has been praised for it's ability to simplify accounting in a way that anybody can understand.

View the original article here