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Chapter 16: Q16-3SE (page 886)

Distinguishing between direct and indirect costs Granger Cards is a manufacturer of greeting cards. Classify its costs by matching the costs to the terms.

  1. Direct materials
  2. Direct labor
  3. Indirect materials
  4. Indirect labor
  5. Other manufacturing overhead

a. Artists’ wages

b. Wages of materials warehouse workers

c. Paper

d. Depreciation on manufacturing equipment

e. Manufacturing plant manager’s salary

f. Property taxes on manufacturing plant

g. Glue for envelopes

Short Answer

Expert verified

Direct labor includes wages which is directly associated with the production process and the required matching is done.

Step by step solution

01

Definition of direct labor

Direct labor is defined as the cost incurred by a business to compensate the employees who are directly involved in the production press.

02

Matching

Direct and indirect cost

Costs

1 Direct Material

C

2 Direct Labor

A

3 Indirect Material

G

4 Indirect Labor

B, E

5 Other manufacturing overhead

D, F

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Most popular questions from this chapter

Identify the following characteristics as primarily related to financial accounting (FA) or managerial accounting (MA):

5. Summary reports prepared quarterly or annually.

Computing cost of goods manufactured and cost of goods sold

Use the following information for a manufacturer to compute cost of goods manufactured and cost of goods sold:

Balances: Beginning Ending

Direct Materials \( 27,000 \) 28,000

Work-in-Process Inventory 40,000 32,000

Finished Goods Inventory 18,000 25,000

Other information:

Purchases of direct materials $ 73,000

Direct labor 88,000

Manufacturing overhead 43,000

Determining the flow of costs through a manufacturer’s inventory accounts

True Fit Shoe Company makes loafers. During the most recent year, True Fit incurred total manufacturing costs of \(21,900,000. Of this amount, \)2,600,000 was direct materials used and \(14,800,000 was direct labor. Beginning balances for the year were Direct Materials, \)700,000; Work-in-Process Inventory, \(1,500,000; and Finished Goods Inventory, \)1,100,000. At the end of the year, balances were Direct Materials, \(800,000; Work-in-Process Inventory, \)2,000,000; and Finished Goods Inventory, $1,080,000.

Requirements Analyze the inventory accounts to determine:

1. Cost of direct materials purchased during the year.

2. Cost of goods manufactured for the year.

3. Cost of goods sold for the year.

Preparing a schedule of cost of goods manufactured Wilson Corp., a lamp manufacturer, provided the following information for the year ended December 31, 2018:

Balances: Beginning Ending

Direct Materials \( 59,000 \) 23,000

Work-in-Process Inventory 109,000 62,000

Finished Goods Inventory 41,000 44,000

Other information:

Depreciation, plant building and equipment $ 16,000

Direct materials purchases 151,000

Insurance on plant 24,000

Sales salaries 47,000

Repairs and maintenance—plant 10,000

Indirect labor 39,000

Direct labor 121,000

Administrative expenses 60,000

Requirements 1. Use the information to prepare a schedule of the cost of goods manufactured.

Calculating income and cost per service for a service company

Buddy Grooming provides grooming services for pets. In April, the company earned \(16,300 in revenues and incurred the following operating costs to groom 660 dogs:

Wages Expense \) 4,061

Grooming Supplies Expense 1,675

Building Rent Expense 900

Utilities Expense 305

Depreciation Expense—Equipment 55

Requirements 1. What is Buddy’s operating income for April?
See all solutions

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