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Direct cost:
A cost indicates the payment of cash or the obligation to pay the cash in the future period for the generation of revenue or the service performed. A direct cost is the cost which is directly involved in the process of production. For example: The cost of plastic is the direct material for manufacturing a bottle.
Indirect cost:
An indirect cost is the cost which is indirectly involved in the process of production. For example: The salary of supervisor of a manufacturing business cannot be traced even though the supervisor contributes for the production.
To classify: Each cost as either direct cost or indirect cost.
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Chapter 15 Solutions
Bundle: Financial & Managerial Accounting, 14th + Working Papers for Warren/Reeve/Duchac's Corporate Financial Accounting, 14th + Working Papers, ... & Managerial Accounting, 14th + CengageNOWv2,
- Depreciation on a courier company’s fleet of delivery trucks is Select one: a. All of the answers given b. committed cost c. discretionary cost. d. engineered coarrow_forwardAll of the following costs would be included when calculating equipment cost, except: Select one: a. Installation costs on new equipment. b. Insurance during transit on new equipment. c. Sales taxes paid on new delivery truck. O d. Motor vehicle licenses cost on delivery trucks.arrow_forwardState and classify the items as per Theory of constraints: 1.Depreciation of a machinery 2.Rental utilities 3.R & D costs 4.Equipment & buildings-costs 5.Raw materials in stock 6.Sales of the product 7.Inventory-Finished goodsarrow_forward
- What costs are considered conversion costs?a. Steel in a car factory b. Depreciation on factory equipmentc. Monthly advertising expenses d. Sales commissionsarrow_forwardWhich of the following is a product cost? A) Sales commissions B) CEO's salary C) Delivery van depreciation D) Depreciation on production equipmentarrow_forwardWhich of the following is an example of a cost that varies in proportion to changes in the activity base? Depreciation on machinery Packaging cost Factory rent Insurance costarrow_forward
- Within the accounting system of a group of companies, the following types of expenses are incurred. Complete the following table by placing each expense in the correct cost classification. Reference Number Types of expenses 1 Costs of opening a new facility 2 Costs of conducting business in a new location or with a new class of customer (including costs of staff training) 3 Costs of site preparation 4 Costs of testing whether the asset is functioning properly 5 Electrical installation costs 6 Costs of dismantling and removing the item and restoring the site on which it is located 7 Administration costs 8 Import duty of an imported machine 9 Purchase of a five-year maintenance contract with plant 10 Legal fees for sales and purchase agreement for acquisition of land 11 Interest on loan on a self constructed property after the asset is ready for use 12 Architect fees incurred for self constructed building 13 General overheads incurred for self…arrow_forwardWhich of the following is a direct cost with respect to producing a motor car? O a. Cost of car engine b. Salary of production supervisor O c. Depreciation of plant & equipment d. Plant utilities Next pagearrow_forwardThe cost of inventories include all of the following, except A. Selling cost B. Costs of purchase C. Costs of conversion D. Other costs incurred in bringing the inventories to their present condition or location.arrow_forward
- (Multiple Choice Question) Casting Corp gets new equipment delivered to its factory. The cost of delivery is: 1. Debit to an asset account called Equipment Delivery 2. Recorded as Freight In 3. Debited to the Equipment account along with the purchase price of the equipment 4. Recorded as Delivery Expensearrow_forwardWhich one of the following accounts is an asset similar to work-in-process inventory? Group of answer choices Construction in Progress Cost of Construction Billings in Excess of Cost Revenue from Long-Term Contractsarrow_forwardArabica Manufacturing Company uses a predetermined manufacturing overhead rate based on a percentage of direct labor cost. At the beginning of 2012, they estimated total manufacturing overhead costs at $1,050,000, and they estimated total direct labor costs at $840,000. In June, 2012, Arabica completed job number 511. Job stats are as follows: Direct materials cost $27,500 Direct labor cost $13,000 Direct labor hours 400 hours Units of product produced: 200 crates How much manufacturing overhead was allocated to the job? O a. $5,000 O b. $34,375 O c $16,250 O d. $10,400arrow_forward
- Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College PubManagerial Accounting: The Cornerstone of Busines...AccountingISBN:9781337115773Author:Maryanne M. Mowen, Don R. Hansen, Dan L. HeitgerPublisher:Cengage LearningPrinciples of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax College
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