Question

For an automobile manufacturer, choose the correct category for the following costs:

Wages of Assembly Line Workers	AnswerSelling CostsFactory OverheadAdministrative CostsDirect LaborDirect Materials
Advertising	AnswerDirect LaborDirect MaterialsSelling CostsFactory OverheadAdministrative Costs
Leather for Seats	AnswerDirect LaborAdministrative CostsDirect MaterialsFactory OverheadSelling Costs
Tires	AnswerFactory OverheadAdministrative CostsDirect MaterialsSelling CostsDirect Labor
Factory Depreciation	AnswerSelling CostsDirect LaborAdministrative CostsFactory OverheadDirect Materials
Salary of CEO	AnswerSelling CostsAdministrative CostsDirect LaborDirect MaterialsFactory Overhead
Office Copier Charges	Selling Costs Factory Overhead Administrative Costs Direct Materials Direct Labor
Sales Incentives to Sales Force	AnswerFactory OverheadDirect LaborSelling CostsAdministrative CostsDirect Materials
Factory Supervisor Salary	AnswerDirect LaborFactory OverheadDirect MaterialsAdministrative CostsSelling Costs
Utilities on Office Building

Answer 1

1. Wages of Assembly Line Workers -  Direct Labour

Wages paid to assembly line workers are direct labour since the costs are directly attributable to the final product

2. Advertising - Selling Cost

Advertising is an expense incurred to promote the sales

3. Leather for Seats - Direct Materials

Leather seats are direct material cost since it can be easily identified with unit of production

4.Tires - Direct Materials

Tires are direct material cost since it can be easily identified with unit of production

5.Factory Depreciation - Factory Overhead

Factory depreciation are indirect expenses incurred during the production process and cannot be traced easily to a single unit of product.

6. Salary of CEO - Adminstrative Costs

Salary of CEO is an Office expense and not associated directly with production

7. Office Copier Charges - Administrative Costs

Office Copier Charges is an Office expense and not assossiated directly with production

8. Sales Incentive to Sales force - Selling Cost

Sales Incentive is incurred to promote the sales

9. Factory Supervisor Salary - Factory Overhead

Factory Supervisor Salary is an indirect expense incurred for production but not directly assossiated with per unit product

10. Utilities of an Office Building - Administratve Cost

Utlilties of an Office Building an indirect expense incurred in office not associated with production

Detailed Explanation:

Direct Material Cost- Those material Costs which can be easily traced per unit of production for ex: How much wood used per table made, how much flour per cake

Direct Labour Cost- Those Labour Costs which can be easly traced per unit of production for ex: A Carpenter making tables, his wage may be per hour or per piece, We can easily calculate the per unit labour cost by knowing how many hrs he takes or what is his piece rate per table

Factory Overhead- These are the indirect costs associated with production process for ex: Cost of consumables like lubricants for machinery, these won't form part of the final product but they are necessary for production. It cannot be traced per unit of production. Another example is the salary of supervisor who supervised the work of carpenters who made the tables. His salary cannot be attributed to a single product easily.

Administration Costs- These are cost not involved in production of goods rather they are incurred in office ex: salary of an accountant

Selling Cost: These costs are incurred to promote the sales ex: Advertising