(a)
Direct Material cost:
Direct material cost is the cost of the material which is directly involved in the production. It constitutes the major portion of the total cost of the finished product. For example: The cost of plastic is the direct material for manufacturing a bottle.
To indicate: Whether the cost of a windshield would be classified as direct materials, direct labor, or manufacturing
(b)
Direct Material cost:
Direct material cost is the cost of the material which is directly involved in the production. It constitutes the major portion of the total cost of the finished product. For example: The cost of plastic is the direct material for manufacturing a bottle.
To indicate: Whether the cost of an engine would be classified as direct materials, direct labor, or manufacturing overhead.
(c)
Direct Labor Cost:
Direct labor cost is the cost of the labor paid to the employees who are directly involved in converting the raw materials to the finished products. It constitutes the major portion of the total cost of the finished product. For example: Wages paid to the mechanic for repairing an automobile.
To indicate: Whether the cost of the wages of the assembly line worker would be classified as direct materials, direct labor, or manufacturing overhead.
(d)
Factory overhead cost is the cost other than the direct material cost, and the direct labor cost which is not directly involved in the production process of converting the raw materials to the finished products. If the direct material cost or direct labor cost does not constitute the major portion of the total cost of the finished product, then it may be classified as the factory overhead cost. For example: Cost of repairing, and maintaining factory equipment.
To indicate: Whether the cost of the depreciation of factory machinery would be classified as direct materials, direct labor, or manufacturing overhead.
(e)
Factory Overhead Cost:
Factory overhead cost is the cost other than the direct material cost, and the direct labor cost which is not directly involved in the production process of converting the raw materials to the finished products. If the direct material cost or direct labor cost does not constitute the major portion of the total cost of the finished product, then it may be classified as the factory overhead cost. For example: Cost of repairing, and maintaining factory equipment.
To indicate: Whether the cost of the factory machinery lubricants would be classified as direct materials, direct labor, or manufacturing overhead.
(f)
Direct Material cost:
Direct material cost is the cost of the material which is directly involved in the production. It constitutes the major portion of the total cost of the finished product. For example: The cost of plastic is the direct material for manufacturing a bottle.
To indicate: Whether the cost of the tires would be classified as direct materials, direct labor, or manufacturing overhead.
(g)
Direct Material cost:
Direct material cost is the cost of the material which is directly involved in the production. It constitutes the major portion of the total cost of the finished product. For example: The cost of plastic is the direct material for manufacturing a bottle.
To indicate: Whether the cost of the steering wheel would be classified as direct materials, direct labor, or manufacturing overhead.
(h)
Factory Overhead Cost:
Factory overhead cost is the cost other than the direct material cost, and the direct labor cost which is not directly involved in the production process of converting the raw materials to the finished products. If the direct material cost or direct labor cost does not constitute the major portion of the total cost of the finished product, then it may be classified as the factory overhead cost. For example: Cost of repairing, and maintaining factory equipment.
To indicate: Whether the salary of the painting supervisor would be classified as direct materials, direct labor, or manufacturing overhead.
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Chapter 1 Solutions
Managerial Accounting: Tools for Business Decision Making
- a. Road Warrior Motor is a company that manufactures and sells cars. Indicate whether each of the following should be considered a product cost or a period cost for the company. If you identify the item as a product cost, also indicate whether it is a direct material cost, direct labor cost, or overhead cost. Write “1” under the correct answer. For example, the answer to item 0 is “product cost” and “overhead cost.” 0. Property taxes on factory building. 1. Cost of buying the metal needed to manufacture cars. 2. Depreciation on the furniture used in the sales showroom. 3. Cost of electricity used in the factories. 4. Salaries of factory workers who manufacture cars. 5. Salaries of factory security guards. 6. Salaries of office workers in the financial department. 7. Depreciation on the warehouse used to store raw materials. 8. Income taxes paid to the government.  b. The company manufactured 100 cars in January 2023 and has not sold any of them by the end of January. If the company…arrow_forwardFor a manufacturing company, which of the following is an example of a period cost rather than a product cost? a. Depreciation on factory equipment b. Advertising expense c. Wages of machine operators d. Insurance on factory equipmentarrow_forwardIdentify whether the following items should be included in Direct Materials (DM), Direct Labor (DL), Manufacturing Overhead (MO) or Period Costs (PC) (a) Assembly line wages (b) Raw materials used directly in product (c) Depreciation on office equipment (d) Property taxes on factory building (e) Rent on factory building (f) Sales commissions (g) Depreciation on factory equipment (h) Factory utilities (i) Wages for factory maintenance workers 0) Advertising (k) Indirect materials used in production (1) Factory manager's salaryarrow_forward
- Classifying Costs as Materials, Labor, or Factory Overhead Indicate whether each of the following costs of an automobile manufacturer would be classified as direct materials cost, direct labor cost, or factory overhead cost: Cost Classification a.  Automobile engine  b.  Brake pads  c.  Depreciation of robotic assembly line equipment  d.  Glass for front and rear windshields  e.  Safety helmets and masks for assembly line workers  f.  Salary of quality control inspector  g.  Steering wheel  h.  Tires  i.  Wages of assembly line workersarrow_forwardBelow is a table showing the various costs incurred by various companies. In each column, indicate the proper classification and explanation of these costs. Write NA if not applicable. Costs Manufacturing (M) or Non-Manufacturing (NM) Direct Materials (DM), Direct Labor (DL) or Factory Overhead (FOH) General and Administrative (GA) or Marketing and Selling (MS) j. Salaries of plant supervisor    k. Interest on bank loan    l. Property tax on the production plantarrow_forwardIndicate whether each of the following costs of a pencil manufacturer would be classified as direct materials (DM), direct labor (DL), or manufacturing overhead (MO).a. ____ Depreciation of pencil painting machineryb. ____ Lead inserted into pencilsc. ____ Factory utilitiesd. ____ Wages of assembly line workere. ____ Salary of supervisorf. ____ Factory machinery maintenanceg. ____ Woodh. ____ Eraser compoundarrow_forward
- Indicate whether each of the following costs of an automobile manufacturer would be classified as direct materials cost, direct labor cost, or factory overhead cost: Cost Classification a.  Depreciation of robotic assembly line equipment  b.  V8 automobile engine  c.  Steering wheel  d.  Wheels  e.  Painting safety masks for employees working in the paint room  f.  Salary of test driver  g.  Glass used in the vehicle’s windshield  h.  Wages of assembly line workerarrow_forwardDetermine whether each of the following costs should be classified as product costs or period costs. (i) Frames and tires used in manufacturing bicycles.(ii) Wages paid to production workers.(iii) Insurance on factory equipment and machinery.(iv) Depreciation on office equipment.(v) Salary to painting supervisorarrow_forwardIdentify the following costs as a prime cost (P), conversion cost (C), or both (B) for an automobile manufacturer:a. Wages of employees that operate painting equipmentb. Wages of the plant managerc. Steeld. Oil used for assembly line machineryarrow_forward
- Classifying Costs as Materials, Labor, or Factory Overhead Indicate whether each of the following costs of an automobile manufacturer would be classified as direct materials cost, direct labor cost, or factory overhead cost: Cost Classification a.  Wheels  b.  Glass used in the vehicle’s windshield  c.  Wages of assembly line worker  d.  V8 automobile engine  e.  Depreciation of robotic assembly line equipment  f.  Steering wheel  g.  Painting safety masks for employees working in the paint room  h.  Salary of test driverarrow_forwardIdentify each of the above costs as direct materials, direct labor, manufacturing overhead, or period costs. Bicycle components Depreciation on factory Property taxes on retail store Labor costs of assembly-line workers Factory supplies used Advertising expense Property taxes on factory Customer delivery expense Sales commissions Salaries paid to sales clerks > < <arrow_forwardWhich one of the following is an example of a period cost? Maintenance on factory machines O Wages of factory workers O Property Tax on Factory O Property tax on Adm. Buildingarrow_forward
Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College Pub
Principles of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax College