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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 the following costs of Colgate-Palmolive Company would he classified as direct materials cost, direct labor cost, or factory overhead cost:
a. Bottles in which mouthwashes are sold
b.Depreciation on production machinery
c. Depreciation on the soap plant
d.Maintenance supplies
e.Packaging department employees wages I Plant manager salary, toothpaste plant g.Resins for soap and shampoo products h.Salary of process engineers
i. Scents and fragrances
j. Wages of production line employees

To determine

Concept Introduction:

There are basically three costs in cost accounting

  1. Direct Material- Material which is required to produce a product is called direct material cost.
  2. Direct Labor- Labor which is required to produce a product in a factory on any machinery is called direct labor.
  3. Factory Overhead- Other overhead which can't be categorized as direct material and direct labor is factory overhead.

To Prepare:

To Decide a particular cost as direct material, direct labor or factory overhead.

Explanation
  1. Since the entity is engaged in the production of soap and shampoos so bottles cost is material cost for entity
  2. Depreciation on production machinery is a factory overhead
  3. Depreciation on soap plant is also a factory overhead
  4. Maintenance supply is always of factory overhead nature
  5. Packing department employee salary is neith...

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