Manufacturing Costs

Question 1

Prime costs

Answer 1

Direct material costs + direct labor costs

Question 2

Conversion costs

Answer 2

Direct labor costs + factory overhead costs

Question 3

What does the issue of indirect materials to a production dept increase?

Answer 3

factory OH control

Question 4

Where is over or under applied OH usually charged to at the end of the pd?

Answer 4

COGS

Question 5

If the calc OH is more than the actual OH, than it is….(over or under applied)

Answer 5

Over applied

Question 6

How is the predetermined OH rate calculated?

Answer 6

Estimated OH costs (both variable and fixed) / budgeted or estimated quantity of a cost driver

Question 7

Where is normal spoilage cost included?

Answer 7

COGS - as a routine cost of business

Question 8

Where is abnormal spoilage included?

Answer 8

as a period cost (not COGS)

Question 9

What is the treatment of scrap?

Answer 9

Any leftover after production - any money received from the sale can reduce OH and therby reduce COGS

Question 10

Where is scrap included?

Answer 10

In the cost of units produced. Included in WIP for a product because it is part of the material cost of the product