Question

Exercise 1-2 Presented below is a list of costs and expenses usually incurred by Barnum Corporation, a manufacturer of furniture, in its factory. Classify the below items into the following categories: (a) direct materials, (b) direct labor, and (C) manufacturing overhead Item Category Salaries for assembly line inspectors. Insurance on factory machines Property taxes on the factory building actory repairs. E Upholstery used in manufacturing furniture. Wages paid to assembly line workers. Ezactory machinery depreciation Glue, nails, paint, and other small parts used in production Factory supervisors' salaries Wood used in manufacturing furniture.

Answer 1

Direct materials are those materials which are consumed during manufacture of product and can be directly traced back to the product. Materials are designated as direct materials in bill of materials.

Direct labor are labor involved in production or manufacturing activities other than administration , maintenance or similar support activities. These can be also directly traced back to production logs.

Manufacturing overhead are indirect costs during the production activities. It cannot be directly traced back to the final product. These are indirect factory related costs. These are not on production logs but on administration, maintenance and other logs. These include indirect materials which form insignificant portion of final product.

1	Salaries for assembly line inspectors	Direct labor or manufacturing overhead
2	Insurance on factory machines	manufacturing overhead
3	property taxes on factory building	manufacturing overhead
4	factory repairs	manufacturing overhead
5	Upholstery used in manufacturing furniture.	direct materials
6	Wages paid to assembly line workers.	direct labor
7	Factory machinery depreciation.	manufacturing overhead
8	Glue, nails, paint, and other small parts used in production.	manufacturing overhead
9	Factory supervisors’ salaries.	manufacturing overhead
10	Wood used in manufacturing furniture.	direct materials

Note that no.1 can be both. It will depend on the nature of the assembly. Some assembly activities are pre-production like in car manufacturing(direct labour) and some are post-production(noodles manufacturing).

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