Hungryman Ltd. (HGL) is a manufacturer that has three frozen product lines; quiches, pies and sausage...

Hungryman Ltd. (HGL) is a manufacturer that has three frozen product lines; quiches, pies and sausage rolls sold to supermarkets, cafes, and online customers. The production manager oversees all three product lines and there are three supervisors who oversee production of each product line. The three product lines share the same manufacturing equipment for example, dough mixer, food processor, conveyor belt and oven.

Required:

If each product line is a cost object, classify the following cost items as direct or indirect cost.

Cardboard trays for packaging quiches only.

Salary of the graphics designer who prepares the online catalogue illustrations and layout. The graphics designer is under contract and paid an agreed fee for the work regardless of hours worked.

Fuel costs of vans used to deliver orders to customers.

Fees for annual service agreement for the conveyor belt. The fee is determined in advance, at the beginning of the year, and the amount is to be paid by the end of the first month of the accounting period.

Cost of flour, eggs, butter, cream and other ingredients used in the manufacture of the quiches.

Expert Solution

Direct cost are the cost which are directly associated with manufacturing of a product.

Indirect cost are those cost which are not direct cost.

Cardboard trays for packaging quiches only. - Indirect cost. As this cost is not directly associated with manufacturing.

Salary of the graphics designer who prepares the online cataloged illustrations and layout. The graphics designer is under contract and paid an agreed fee for the work regardless of hours worked. - Indirect cost. As this cost is not directly associated with manufacturing.

Fuel costs of vans used to deliver orders to customers.- Indirect cost. As this cost is not directly associated with manufacturing

Fees for annual service agreement for the conveyor belt. The fee is determined in advance, at the beginning of the year, and the amount is to be paid by the end of the first month of the accounting period. - Direct cost. As this is directly associated with manufacturing of the product.

Cost of flour, eggs, butter, cream and other ingredients used in the manufacture of the quiches. - Direct cost. As this is directly associated with manufacturing of the product.

ekkarill92 answered 2 years ago

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