COSTS WITH RESPECT TO VOLUME OR ACTIVITY SEMI-VARIABLE OVERHEAD: A part of such expenses is fixed & a part is variable. Example: Telephone Expense Bill
Categories of Manufacturing Costs All costs which are eventually allocated to products are classified as either… 1 direct materials, 2 direct labor, or 3 indirect manufacturing.
– include the acquisition costs of all materials that are
physically identified as a part of the manufactured goods and that may be traced to the manufactured goods in an economically feasible way. – Example: Timber in chair or table, cloth in shirt, Basic or essential packing materials like cartons, boxes, papers etc.
– include the wages of all labor that can be traced
specifically and exclusively to the manufactured goods in an economically feasible way. – The cost of wages paid to skilled or unskilled workers and assignable to the unit produced is termed direct labor.
Indirect Manufacturing Costs or Factory Overheads... – or factory overhead, include all costs ( indirect material, indirect labor & other indirect expenses ) associated with the manufacturing process that cannot be traced to the manufactured goods in an economically feasible way. – Simply stated factory overhead includes all manufacturing cost except direct materials & direct labor.
Indirect Manufacturing Costs or Factory Overheads ( Cont’d ) Indirect Material: Material cost which can not be allocated or identified, but which are to absorbed by the units produced. Example: Lubricants, factory supplies, tacks, tools for general use, glue, thread in shirt, nails in furniture. Indirect Labor: Labor cost which can not be allocated or identified, but which are to be absorbed by the units produced. Example: Idle time wages, Maintenance & Repair Wages, Salary of peon, guard, general helpers, cleaners etc. Indirect Expenses: All indirect cost other than indirect material & indirect labor which can not be allocated or identified, but which are to absorbed by the units produced. Example: Canteen, Depreciation, Insurance, Taxes, Rent, Heat & Light etc.