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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Direct materials, direct labor, and factory overhead

Identify the following costs as direct materials (DM), direct labor (DL), or factory overhead (FO) for an automobile manufacturer.

  1. a. Wages of employees that operate painting equipment
  2. b. Wages of the plant supervisor
  3. c. Steel
  4. d. Oil used for assembly line machinery

(a)

To determine

Direct Material cost:

Direct material cost is the cost of the material which is directly involved in the production. It constitutes the major portion of the total cost of the finished product. For example: The cost of plastic is the direct material for manufacturing a bottle.

Direct Labor Cost:

Direct labor cost is the cost of the labor paid to the employees who are directly involved in converting the raw materials to the finished products. It constitutes the major portion of the total cost of the finished product. For example: Wages paid to the mechanic for repairing an automobile.

Factory Overhead Cost:

Factory overhead cost is the cost other than the direct material cost, and the direct labor cost which is not directly involved in the production process of converting the raw materials to the finished products. If the direct material cost or direct labor cost does not constitute the major portion of the total cost of the finished product, then it may be classified as the factory overhead cost. For example: Cost of repairing, and maintaining factory equipment.

To identify: The given costs as direct materials (DM), direct labor (DL), or factory overhead (FO) for the automobile manufacturer.

Explanation

The cost of the wages of employees who operate painting equipment is Direct labor (DL).

The wages of the employees who operate painting equipment is the cost which is directly involved in the production...

(b)

To determine

To identify: The given costs as direct materials (DM), direct labor (DL), or factory overhead (FO) for the automobile manufacturer.

(c)

To determine

To identify: The given costs as direct materials (DM), direct labor (DL), or factory overhead (FO) for the automobile manufacturer.

(d)

To determine

To identify: The given costs as direct materials (DM), direct labor (DL), or factory overhead (FO) for the automobile manufacturer.

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