TP2. LO 2.2This list contains costs that various organizations incur; they fall into three categories: direct materials (DM), direct labor (DL), or overhead (OH).7Classify each of these items as direct materials, direct labor, or overhead.Glue used to attach labels to bottles containing a patented medicine.Compressed air used in operating paint sprayers for Student Painters, a company that paints houses and apartments.Insurance on a factory building and equipment.A production department supervisor’s salary.Rent on factory machinery.Iron ore in a steel mill.Oil, gasoline, and grease for forklift trucks in a manufacturing company’s warehouse.Services of painters in building construction.Cutting oils used in machining operations.Cost of paper towels in a factory employees’ washroom.Payroll taxes and fringe benefits related to direct labor.The plant electricians’ salaries.Crude oil to an oil refinery.Copy editor’s salary in a book publishing company.Assume your classifications could be challenged in a court case. Indicate to your attorneys which of your answers for part a might be successfully disputed by the opposing attorneys and why. In which answers are you completely confident?

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Answered: LO 2.2This list contains costs that…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter2: Building Blocks Of Managerial Accounting

Section: Chapter Questions

Problem 2TP: This list contains costs that various organizations incur; they fall into three categories: direct...

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TP2.

LO 2.2This list contains costs that various organizations incur; they fall into three categories: direct materials (DM), direct labor (DL), or overhead (OH).⁷

Classify each of these items as direct materials, direct labor, or overhead.
1. Glue used to attach labels to bottles containing a patented medicine.
2. Compressed air used in operating paint sprayers for Student Painters, a company that paints houses and apartments.
3. Insurance on a factory building and equipment.
4. A production department supervisor’s salary.
5. Rent on factory machinery.
6. Iron ore in a steel mill.
7. Oil, gasoline, and grease for forklift trucks in a manufacturing company’s warehouse.
8. Services of painters in building construction.
9. Cutting oils used in machining operations.
10. Cost of paper towels in a factory employees’ washroom.
11. Payroll taxes and fringe benefits related to direct labor.
12. The plant electricians’ salaries.
13. Crude oil to an oil refinery.
14. Copy editor’s salary in a book publishing company.
Assume your classifications could be challenged in a court case. Indicate to your attorneys which of your answers for part a might be successfully disputed by the opposing attorneys and why. In which answers are you completely confident?

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