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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 factory overhead

Which of the following items are properly classified as part of factory overhead for Ford Motor Company, a maker of heavy automobiles and trucks?

  1. a. Plant manager’s salary at Buffalo, New York, stamping plant, which manufactures auto and truck subassemblies
  2. b. Depreciation on Flat Rock, Michigan, assembly plant
  3. c. Dividends paid to shareholders
  4. d. Machine lubricant used to maintain the assembly line at the Louisville, Kentucky, assembly plant
  5. e. Leather to be used on vehicles that have leather interiors
  6. f. Depreciation on mechanical robots used on the assembly line
  7. g. Consultant fees for a study of production line efficiency
  8. h. Dealership sales incentives
  9. i. Vice president of human resources’ salary
  10. j. Property taxes on the Detriot, Michigan, headquarters building

To determine

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 the given items are properly classified as part of factory overhead cost for Company F.

Explanation

The items classified under factory overhead cost for Company F are as follows:

Sl.

No

Particulars Types of costs
a. Plant manager’s salary at NY City, stamping plant, which manufactures auto and truck subassemblies. Factory overhead cost
b. Depreciation on assembly plant Factory overhead cost
c. Dividends paid to shareholders. -
d. Machine lubricant used to maintain the assembly line Factory overhead cost
e. Leather to be used on vehicles that have leather  interiors -
f. Depreciation on mechanical robots used on the assembly plant Factory overhead cost
g...

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