 Show CHAPTER 2 AN INTRODUCTION TO COST TERMS AND PURPOSES 2.4Factors affecting the classification of a cost as direct or indirect include the materiality of the cost in question available information-gathering technology design of operations 2.5A variable cost changes in total in proportion to changes in the related level of total activity or volume. An example is a sales commission that is a percentage of each sales revenue dollar. A fixed cost remains unchanged in total for a given time period, despite wide changes in the related level of total activity or volume. An example is the leasing cost of a machine that is unchanged for a given time period (such as a year) regardless of the number of units of product produced on the machine. 2-6A cost driver is a variable, such as the level of activity or volume, that causally affects total costs over a given time span. A change in the cost driver results in a change in the level of total costs. For example, the number of vehicles assembled is a driver of the costs of steering wheels on a motor-vehicle assembly line. 2-7The relevant range is the band of normal activity level or volume in which there is a specific relationship between the level of activity or volume and the cost in question. Costs are described as variable or fixed with respect to a particular relevant range. 2-8A unit cost is computed by dividing some amount of total costs (the numerator) by the related number of units (the denominator). In many cases, the numerator will include a fixed cost that will not change despite changes in the denominator. It is erroneous in those cases to multiply the unit cost by activity or volume change to predict changes in total costs at different activity or volume levels. 2-9Manufacturing-sector companies purchase materials and components and convert them into various finished goods, for example automotive and textile companies. Merchandising-sector companies purchase and then sell tangible products without changing their basic form, for example retailing or distribution. Service-sector companies provide services or intangible products to their customers, for example, legal advice or audits. 2.10Manufacturing companies have one or more of the following three types of inventory: 1.Direct materials inventory. Direct materials in stock and awaiting use in the manufacturing process. 2.Work-in-process inventory. Goods partially worked on but not yet completed. Also called work in progress. 3.Finished goods inventory. Goods completed but not yet sold. 2.11 Inventoriable costs are all costs of a product that are considered as assets in the balance sheet when they are incurred and that become cost of goods sold when the product is sold. These 2-1 Which of the following is a manufacturing overhead cost?Manufacturing overhead includes such things as the electricity used to operate the factory equipment, depreciation on the factory equipment and building, factory supplies and factory personnel (other than direct labor).
Which of the following is an example of manufacturing overhead?Examples of costs that are included in the manufacturing overhead category are as follows: Depreciation on equipment used in the production process. Property taxes on the production facility. Rent on the factory building.
Which of the following is a direct cost of manufacturing in automobile?24. Which of the following is a direct cost of manufacturing an automobile? Tires are a direct material for the automobile. The salary of an engineer and plant depreciation are manufacturing overhead costs.
Is manufacturing overhead a manufacturing cost?Manufacturing overhead is part of a company's manufacturing operations, specifically, the costs incurred outside of those related to the cost of direct materials and labor. This is why manufacturing overhead is also called an indirect cost.
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Which of the following is a manufacturing overhead cost for an automobile manufacturer?
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