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Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883

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Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883
Textbook Problem

Classifying costs as materials, labor, or factory overhead
Indicate whether each of the following costs of an airplane manufacturer would be classified as direct materials cost, direct labor cost, or factory overhead cost:
a.Aircraft engines
b.Controls for flight deck
c. Depreciation of equipment
d.Landing gear
e.Machine lubricants
f. Salary of plant superintendent
g.Tires
h.Wages of assembly line worker

To determine

Concept Introduction:

Direct and Indirect Costs:

Manufacturing costs can be divided into two types; Direct costs and Indirect costs. Direct costs are easily traceable with the product like direct material and direct labor and indirect costs are not traceable easily like indirect material indirect labor and overheads.

Manufacturing overhead costs:

Manufacturing overhead cost is the pool of all indirect costs incurred for the production. These are the costs which are not directly traceable to the product. Manufacturing costs include indirect material indirect labor and overheads.

To Indicate:

The classification for each cost

Explanation

Manufacturing costs can be divided into two types; Direct costs and Indirect costs. Direct costs are easily traceable with the product like direct material and direct labor and indirect costs are not traceable easily like indirect material indirect labor and overheads.

Manufacturing overhead cost is the pool of all indirect costs incurred for the production. These are the costs which are not directly traceable to the product. Manufacturing costs include indirect material indirect labor and overheads. The classification for each cost is as follows:

    Cost #Classification
    a.Direct MaterialAircraft engine is a direct material cost for airplane manufacturer
    bDirect MaterialControls for flight desk is a direct material cost for airplane manufacturer

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