Question

The PC Works assembles custom computers from components supplied by various manufacturers. The company is very
small and its assembly shop and retail sales store are housed-in-a single facility in a Redmond, Washington, industrial
park. Listed below are some of the costs that are incurred at the company.
Required:
For each cost, indicate whether it would most likely be classied as direct labor, direct materials, manufacturing overhead,
selling, or an administrative cost.
1. The cost of a hard drive installed in a computer.
2. The cost of advertising in the Puget Sound Computer User newspaper.
3. The wages of employees who assemble computers from components.
4. Sales commissions paid to the company’s salespeople.
5. The wages of the assembly shop’s supervisor.
6. The wages of the company’s accountant.
7. Depreciation on equipment used to test assembled computers before release to customers.
8. Renton the facility in the industrial park.

Answer 1

Answer:

1.Direct materials cost

2.  Cost or expense of Selling and Marketing

3.  Expense of Direct labor

4. Marketing and selling cost

5. Manufacturing overhead cost

6. Administrative cost

7. Manufacturing overhead cost

8. Marketing and selling cost, administrative cost

Explanation:

Direct material cost is the raw material cost and the components which are used to create the product.

Manufacturing overhead cost is the cost which is used or incurred for the process of manufacturing.

Direct labor cost is the cost or an expense which is paid to the workers who manufacture the product and make the product ready to sell in the market.

Selling, or an administrative cost is the cost which is related  to the asset which is used in the sales function.

1. Cost of installing the hard drive on computer: Direct materials cost

2. Advertising expense in the newspaper: marketing and selling cost

3. Salary or the wages of the employees : direct labor cost

4. Sales commissions paid to the sales person of the company: marketing and selling cost

5. Assembly supervisor of the shop, given the wages: manufacturing overhead cost

6. Wages or salary of the accountant of the company : administrative cost

7. The equipment which is being used to test the computers that have been assembled before giving to the end user and on it depreciation is charged: manufacturing overhead cost

8. Rent on the facility  provided : manufacturing overhead cost, marketing and selling cost, administrative cost