Question

Indicate whether each of the following costs of a cabinet manufacturer would be classified as direct materials cost, direct labor cost, factory overhead cost, or period cost.

Plant manager’s salary _______________________________

Office administrative assistant’s salary _____________________________

Depreciation on factory equipment ________________________________

Rent on office building _______________________________

Varieties of wood ______________________________

Varnish for costing cabinets _______________________________

Utilities cost on the factory _______________________________

Cabinet assembly worker’s salary ________________________________

Advertising costs ________________________________

Screws and glue used in assembly process ____________________________

Answer 1

SOLUTION:

Solution:

1	Plant manager’s salary	Factory overhead
2	Office administrative assistant’s salary	Period
3	Depreciation on factory equipment	Factory overhead
4	Rent on office building	Period
5	Varieties of wood	Direct material
6	Varnish for costing cabinets	Factory overhead
7	Utilities cost on the factory	Factory overhead
8	Cabinet assembly worker’s salary	Direct labor
9	Advertising costs	Period
10	Screws and glue used in assembly process	Factory overhead

?

Direct material cost refers to those cost of the raw materials and components utilized to create a product.

Direct labor are those employees and temporary help that work directly on a manufacturer's goods.

Factory overhead are costs incurred during the process of manufacturing, not including the costs of direct labor and direct materials.

A period cost are those cost that cannot be capitalized into prepaid expenses, fixed assets, or inventory.