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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 factory overhead
Which of the following items are properly classified as part of factory overhead for Caterpillar?
a. Amortization of patents on new assembly process
b.Consultant fees for a study of production line employee productivity C. Depreciation on Peoria. Illinois, headquarters building
d.Factory supplies used in the Morganton. North Carolina, engine parts plant
e.Interest expense on debt
f. Plant manager's salary at Aurora, Illinois, manufacturing plant
g.Properly taxes on the Danville, Kentucky, tractor tread plant h.Sales incentive fees to dealers
i. Steel plate
j. Vice president of finance's salary

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 Identify:

The items classified as part of the factory overhead for the company

Explanation

The items classified as part of the factory overhead for the company are explained as follows:

    Item #Part of Overhead or not
    a.YesAmortization expense on patents of assembly process is an overhead cost
    b.YesConsultant fees for a study of production productivity is an overhead cost
    cNoDepreciation on headquarters building is an administrative cost
    dYesFactory su...

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