Question

If the cost object is a manufactured product, what are the three major cost categories to accumulate? Explain each.

Answer 1

Answer:

THREE MAJOR COST CATEGORIES

1. Direct Material cost

The cost which goes directly into the manufacturing a product such as raw material used to make the oroduct is referred to as direct material cost. For exmple: If a car manufacturer uses iron plates, then it is a direct material cost.

2. Direct Labour cost

This cost includes the wages and other benefits given to those people who work as labor in the production of goods. In other words, wages given to labor involved in the manufacturing of products consititute direct labor cost.

For example: wages given to carpenters for making tables and chairs is called direct labor cost

3. Manufacturing Overhead (MOH)

It includes both the indirect labour cost as well as indirect material cost. Indirect material cost is the cost of those materials which are used in production but are not directly related to the manufacturing of the product, example: oil, glue, tape, etc. And indirect labor cost is salary paid to supervisor (a person not directly involved in manufacturing the product). Another example is wages paid to security guard. (again not directly involved in manufacturing)

I hope you like my explanation. Please help me with an upvote :)

It means a lot.