Question

choose a product that you are familiar with and list the costs associated with the manufacturing process of the product. Be sure to include Direct, indirect, and factory overhead costs. Instructions: Use the text box provided to answer the provided question. You may have to use your textbook, an external website, or other resources. Your answer should be in complete sentences and should completely answer the question. Minimum of 100 words.

Answer 1

Definition of Manufacturing Costs

Manufacturing costs are the costs of materials plus the costs to convert the materials into products. All manufacturing costs must be assigned to the units produced in order for a company's external financial statements to comply with U.S. GAAP.

The resulting unit costs are used for inventory valuation and for the calculation of the cost of goods sold.

Example of Manufacturing Costs

Manufacturing costs are typically divided into three categories:

• Direct materials, which is the cost of the materials that are traceable to the product, such as the aluminum in beverage cans
• Direct labor, which are the wages and fringe benefits earned by the individuals who are physically involved in converting raw materials into a finished product
• Manufacturing overhead, which includes all of the other costs incurred in the manufacturing activities. These indirect costs include repairs and maintenance, depreciation of the manufacturing equipment, utilities, salaries of manufacturing supervisors, etc.

• Questions of manufacturing cost

  Herb’s Herbs packages high-quality dried herbs for home use. The following costs are taken from Herb’s accounting records:

• Fresh herbs: $137,000

• Depreciation on the drying machine: $8,100

• Glass jars for packaging the herbs: $5,000

• Electricity to run the drying machines: $15,000

• Answer

  $165,100

  The manufacturing costs are the costs directly associated with production—in this case, direct materials, variable overhead, and fixed overhead. The herbs and the glass jars are direct materials. The electricity to run the drying machines is a variable overhead cost. Depreciation on the drying machine is a fixed overhead cost.

  

  137,000 +8.100 +5,000 + 15,000 = 165.100