Question

Determine if the following costs would be considered direct or indirect for a division which manufactures bicycles.

Answer 1

The classifications for each of the costs are respectively; Direct Materials, Direct Labor, Materials Overhead, Materials Overhead.

How to classify direct or Indirect Costs?

1. Frames and tires used in manufacturing bicycles; This cost would be classified as Direct materials.

2. Wages paid to production workers; This cost would be classified as Direct Labor as that is what it is used for.

3. Insurance on factory equipment and machinery; This cost will be classified as Manufacturing Overhead because it involves overheads necessary for manufacturing.

4. Depreciation on factory equipment; This cost will be classified as Manufacturing Overhead because it involves overheads necessary for manufacturing.

Complete question is;

Determine whether each of the following costs should be classified as direct materials, direct labor, or manufacturing overhead.

1. Frames and tires used in manufacturing bicycles.

2. Wages paid to production workers.

3. Insurance on factory equipment and machinery.

4. Depreciation on factory equipment.

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