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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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Section
BuyFindarrow_forward

Accounting

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

Classifying costs as materials, labor, or factory overhead

Indicate whether the following costs of Procter & Gamble, a maker of consumer products, would be classified as direct materials cost, direct labor cost, or factory overhead cost:

  1. a. Resins for body wash products
  2. b. Scents and fragrances used in making soaps and detergents
  3. c. Plant manager salary for the Iowa City, Iowa, plant
  4. d. Depreciation on the Auburn, Maine, manufacturing plant
  5. 1. c. Depreciation on assembly line in the Mehoopany, Pennsylvania, paper products plant
  6. e. Maintenance supplies
  7. f. Packaging materials, which are a significant portion of the total product cost
  8. g. Wages of production line employees at the Pineville, Louisiana, soap and detergent plant
  9. h. Wages paid to Packaging Department employees in the Bear River City, Utah, paper products plant
  10. i. Salary of process engineers

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 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 indicate: Whether each of the given cost of a Manufacturer PG would be classified under direct material cost, direct labor cost, or factory overhead cost.

Explanation

The given costs of a Manufacturer PG are classified as follows:

Sl.

No

Particulars Types of costs
a. Resins for body wash products. Direct materials cost
b. Scents and fragrances used in making soaps and detergents. Direct materials cost
c. Plants manager salary for the L city, L plant. Factory overhead cost
d. Depreciation on manufacturing plant Factory overhead cost
e. Depreciation  of  assembly line paper product plant Factory overhead cost
f. Maintenance supply Factory overhead cost
g. Packing materials, which are significant portion of the total product cost. Direct materials cost
h...

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