Question

Exercise 14-5 Classifying manufacturing costs LO C2 Selected costs related to Apple's iPhone are listed below. Identify each cost as either direct materials, direct labor, factory overhead, selling expenses, or general and administrative expenses by selecting the appropriate dropdowns. 1. Quality control supervisor salary 2. Uniforms provided for each factory worker 3. Depreciation on office equipment 4. Display screen 5. Camera 6. Advertising campaigns Maintenance of assembly equipment 8. Wages for retail store worker

Answer 1

1. Quality control supervisor salary - direct labour

Quality control supervisor is directly related to production activity as he helps in checking the quality of products and hence direct in nature and classified as direct labour

2. Uniforms provided for each factory worker - factory overhead

Uniforms for factory worker is directly related to production and hence a factory overhead and not administrative overhead.

3. Depreciation on office equipment - administrative and general overhead

Depreciation is considered as an indirect expenditure and hence classified as administrative overhead.

4. Display screen - direct material

The display screen is an internal and important part of mobile without which it cannot function and hence a direct material cost.

5. Camera - direct material

Camera are important and necessary feature in modern dats mobile and hence a direct material cost.

6. Advertising campaigns - Selling overheads

These are used to advertise which help in selling the products and hence are classified as selling overheads.

7. Maintenance of assembly overhead - factory overhead

Assembly equipment is used for production and hence a cost related to factory and allocated through factory overhead.

8. Wages for retail store worker - administrative and General overhead

Retail store worker is not directly related to production activity and such expense is indirect in nature and hence administrative overhead.