Question

The PC Works assembles custom computers from components supplied by various manufacturers. The company is very small and its assembly shop and retail sales store are housed in a single facility in a Redmond, Washington, industrial park. Listed below are some of the costs that are incurred at the company. Required: For each cost, indicate whether it would most likely be classified as direct materials, direct labor, manufacturing overhead, selling, or an administrative cost. 1.The cost of a hard drive installed in a computer. Direct labor cost Direct materials cost Manufacturing overhead cost Selling cost Administrative cost 2. The cost of advertising in the Puget Sound Computer User newspaper Direct labor cost Direct materials cost Manufacturing overhead cost Selling cost Administrative cost

Answer 1

1) Direct Materials Cost

Because hard drive is an integral part of the computer.

2) Selling Cost

Advertising is an indirect expense to boost sales.

3) Direct Labor Cost

Wages of Assembly workers is a direct cost to the company.

4) Selling Cost

Sales commission is a selling cost.

5) Manufacturing Overhead Cost

It is an indirect labor cost to the company.

6) Administrative Cost

Salary of an accountant is an indirect expense to the company.

7) Manufacturing Overhead Cost

Depreciation on Equipment can be claimed as Manufacturing Overhead Cost.