Question

Indicate whether each of the following costs of an automobile manufacturer would be classified as direct materials, direct labor, or manufacturing overhead. (a) select an option Windshield. (b) select an option Engine. (c) select an option Wages of assembly line worker. (d) select an option Depreciation of factory machinery. (e) select an option Factory machinery lubricants. (f) select an option Tires. (g) select an option Steering wheel. (h) select an option Salary of painting supervisor.

Answer 1

Answer:

1. Direct materials: Windshield.

2. Direct materials: Engine.

3. Direct labor: Wages of assembly line worker.

4. Manufacturing overhead: Depreciation of factory machinery.

5. Manufacturing overhead: Factory machinery lubricants.

6. Direct materials: Tires.

7. Direct materials: Steering wheel.

8. Manufacturing overhead: Salary of painting supervisor.

Explanation:

Product costs in accounting, are the costs which are directly incurred by a company from its manufacturing process. These costs are mainly classified into three (3);

1. Direct materials cost: these are typically the cost of the raw materials and components used in manufacturing a particular product. Examples are windshield, engine, tires, etc.

2. Direct labor: these refers to the wages, salaries, insurance, and benefits being paid to employees that are directly involved in manufacturing and producing specific finished products. Examples are wages of assembly line worker, systems engineer and operators etc.

3. Manufacturing overhead: these include indirect costs and direct manufacturing costs incurred during the production process of a product. Examples are salary of painting supervisor, cost of equipments, depreciation of factory machinery etc.