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In: Accounting

For a construction contractor the wages of carpenters would be classified as a factory overhead cost.

For a construction contractor the wages of carpenters would be classified as a factory overhead cost.

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Expert Solution

Factory overhead costs are a part of manufacturing costs.

These costs are not directly attributed to the finished product but instead they are allocated to the finished product on the basis of a cost driver using a predetermined overhead rate.

Labor and wages cost can be Direct labor costs or Factory Overhead Costs depending upon the purpose they serve for the production process.

In the given case, the issue under consideration is whether the wages of carpenter paid by the construction contractor will be classified as Direct Labor or Factory Overhead.

Now, the primary work of the construction contractor is to construct buildings and accordingly Building material is his Direct Material Cost and Construction Labor Costs are his Direct labor Costs. Carpentry job is a job related to main job but not a main job itself. Hence, it will be classified as a factory overhead cost.

Therefore, YES, the wages of carpenters would be classified as a factory overhead cost for a construction contractor.

ekkarill92 answered 1 year ago
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