Question

Administrators of crawford county's memorial hospital are interested in identifying the various costs and expenses that are incurred in producing a patient's x-ray. a list of such costs and expenses is presented below. the administrators want these costs and expenses classified as (a) direct materials, (b) direct labor, or (c) service overhead. for each item, indicate the cost category to which the item belongs. item category 1. salaries for the x-ray machine technicians. 2. wages for the hospital janitorial personnel. 3. film costs for the x-ray machines. 4. property taxes on the hospital building. 5. salary of the x-ray technicians' supervisor. 6. electricity costs for the x-ray department. 7. maintenance and repairs on the x-ray machines. 8 x-ray department supplies. 9. depreciation on the x-ray department equipment. 10. depreciation on the hospital building.

Answer 1

A. The items that fall under the DIRECT MATERIAL category include the following:
1. Film cost for the X ray machine.
2. Electricity cost for the X ray department.
3. Maintenance and repair on the X ray machine.
4. X ray department supplies.
The items that fall under the DIRECT LABOUR category include the following:
1. Salaries of the X ray machine technician.
2. Salary of the X ray technicians' supervisor.
The items that fall under the SERVICE OVERHEAD category include the following:
1. Wages for the hospital janitorial personnel.
2. Property taxes on the hospital building.
3. Depreciation on the hospital building.
4. Depreciation on the X ray department equipment [Manufacturing overhead]

B. The costs that are incurred during the production of a good or service are usually divided into three categories, which are direct material, direct labour and overhead costs.
Direct materials refer to those materials used in the production process which can be traced to a particular unit or department. A good example of a direct material is the raw materials used in the production unit for the production of a particular product.
Direct labour refers to the salaries and wages of those employees that are directly involved in the production process or in carrying out a particular operation. An example of a direct labour for the production of chocolates is the salary of those workers in the production unit.
Overhead cost refers to all other costs that are incurred during the process of production.These costs can not be traced to a specific department per say, but it cover the whole business unit. Overhead cost is of two types: administrative and manufacturing overheads. Examples of overhead costs are rent, utilities, insurance, depreciation, etc.