Question

Top Shelf Company builds oak bookcases. Determine whether each of the following is a direct material (DM), direct labor (DL), manufacturing overhead (MOH), or a period (P) cost for Top Shelf. ____ (1) Depreciation on factory equipment. ____ (2) Depreciation on delivery trucks. ____ (3) Wood used to build a bookcase. ____ (4) Production supervisor’s salary. ____ (5) Glue and screws used in the bookcases. ____ (6) Wages of persons who assemble the bookcases. ____ (7) Cost to run an ad on local radio stations. ____ (8) Rent for the factory. ____ (9) CEO’s salary. ____ (10) Wages of person who sands the wood after it is cut.

Answer 1

Answer:

(1) Depreciation on factory equipment. ____MOH

(2) Depreciation on delivery trucks. ____ Period Cost

(3) Wood used to build a bookcase. ____Direct Material

(4) Production supervisor’s salary. ____ MOH

(5) Glue and screws used in the bookcases. ____ MOH

(6) Wages of persons who assemble the bookcases. ____Direct Labor

(7) Cost to run an ad on local radio stations. ____Period Cost

(8) Rent for the factory. ____ MOH

(9) CEO’s salary. ____ Period Cost

(10) Wages of person who sands the wood after it is cut. Direct Labor

Period Cost are costs that are not directly involved in the manufacturing costs of a product but are incurred in a particular  period. These expenses include advertising and selling expenses.

Direct Materials are material used to make a product . For example wood is a direct material for making shelves.

Direct Labor are the wages paid to the people who work in the production of a product.

Manufacturing Overheads are charges associated with the manufacturing of a product.they are indirect costs of the production like rent of the building etc.