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

3.The wages of employees who assemble computers from components.

• Direct labor cost

• Direct materials cost

• Manufacturing overhead cost

• Selling cost

• Administrative cost

4.Sales commissions paid to the company’s salespeople.

• Direct labor cost

• Direct materials cost

• Manufacturing overhead cost

• Selling cost

• Administrative cost

5.The salary of the assembly shop’s supervisor.

• Direct labor cost

• Direct materials cost

• Manufacturing overhead cost

• Selling cost

• Administrative cost

6.The salary of the company’s accountant.

• Direct labor cost

• Direct materials cost

• Manufacturing overhead cost

• Selling cost

• Administrative cost

7.Depreciation on equipment used to test assembled computers before release to customers.

• Direct labor cost

• Direct materials cost

• Manufacturing overhead cost

• Selling cost

• Administrative cost

Answer 1

Answer:

1. Direct material cost

2. Selling cost ( marketing and selling cost)

3. Direct labor cost

4. Selling cost ( marketing and selling cost)

5. Manufacturing overhead cost

6. Administrative cost

7. Manufacturing overhead cost