COST ACCOUNTING
INTRODUCTION TO COST ACCOUNTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Glue in the chair
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The amount paid to the individual who stains the chair
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The workman’s compensation insurance of the supervisor who oversees production
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The factory utilities of the department in which production takes place
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Detailed explanation-1: -Answer and Explanation: The correct option is (B) The amount paid to the individual who stains a chair. Glue in a chair would be considered as indirect material and would be included in manufacturing overhead.
Detailed explanation-2: -Manufacturing overhead does not include any of the selling or administrative functions of a business. Thus, the costs of such items as corporate salaries, audit and legal fees, and bad debts are not included in manufacturing overhead.
Detailed explanation-3: -Usually manufacturing overhead costs include depreciation of equipment, salary and wages paid to factory personnel and electricity used to operate the equipment.
Detailed explanation-4: -Factory overhead excludes: Product materials. Employee costs of those actively manufacturing the product. External administrative overhead, such as an outside headquarters or human resources.
Detailed explanation-5: -The commission paid to the salesperson who sold the table is an indirect cost, so therefore it would be included in manufacturing overhead since it isn’t tracked directly to the product.