Lease Equipment Cost and INSURANCE ON PLANT BUILDING of a Manufacturing Company is a Manufacturing Cost...

Lease Equipment Cost and INSURANCE ON PLANT BUILDING of a Manufacturing Company is a Manufacturing Cost or a Non Manufacturing Cost (Period Cost) ? Explain With Example

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Expert Solution

Manufacturing costs are the costs that are incurred in order to produce a product after that product has gone through the manufacturing process that includes materials, labor and other manufacturing overheads. Any cost incurred directly into the production or manufacturing of that product is treated as manufacturing costs.

Lease Equipment Cost does not involve in manufacturing process as it is a cost which Lessee agrees to pay to the Lessor to use the equipment under the lease, hence, it is a non-manufacturing cost.

Insurance on Plant Building of a Manufacturing Company is treated as Manufacturing Cost under the Manufacturing Overheads because it is also part of the cost of the product under the Manufacturing Overheads.

ekkarill92 answered 1 year ago

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