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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
With a group of students, visit a local copy and graphics shop or a take-out pizza restaurant. As you observe the operation, consider the costs associated with running the business. As a group, identify as many costs as you can and classify them according to the following table headings:

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 example for each type of the cost for a takeout pizza restaurant

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 example for each type of the cost for a takeout pizza restaurant is as follows:

    Cost Direct MaterialsDirect LaborOverheadSelling Expense
    Flour and CheeseX

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