Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883



Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883
Textbook Problem

Which of the following costs would be included as part of the factory overhead costs of a computer manufacturer?
A.The cost of memory chips
B.Depreciation of testing equipment
C.Wages of computer assemblers
D. The cost of disk drives

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 choose:

The factory overhead cost of a computer manufacturer


Explanation for correct answer:

Depreciation of testing equipment is overhead cost for a computer manufactured. Hence option B is the right answer.

Explanation for incorrect answers:

A. Cost of Memory chip is a direct cost for computer manufacturer...

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