A manufacturing company prepays its insurance coverage for a three-year period. The premium for the three years is $2,850 and is paid at the beginning of the first year. Seventy percent of the premium applies to manufacturing operations and thirty percent applies to selling and administrative activities. What amounts should be considered product and period costs respectively for the first year of coverage?Product Period $2,850 $0$1,995 $855$1,330 $570$665 $285

Product     Period

$665         $285

Product Cost=$665.

Period Cost=$285.

Explanation:

Product     Period

$665         $285

Given Data:

The premium for the three years=$2,850

Premium applies to manufacturing operations=70%=0.7

Premium applies to selling and administrative activities=30%=0.3

Total Number of years= 3 years

Required:

Product Cost=?

Period Cost=?

Solution:

Amount for first Year=

Amount for first Year=

Now:

Product Cost:

Premium applies to manufacturing operations=70%=0.7 of above amount

Product Cost=$950*0.7

Product Cost=$665.

Period Cost:

Premium applies to selling and administrative activities=30%=0.3

Period Cost=$950*0.3

Period Cost=$285.