CLASSIFY THE FOLLOWING ACTIVITIES JIM OWNS CAPE INC. THE COMPANY MANUFACTURES FL
ID: 2394891 • Letter: C
Question
CLASSIFY THE FOLLOWING ACTIVITIES
JIM OWNS CAPE INC. THE COMPANY MANUFACTURES FLOW JETS AND SELLS THEM TO FIRE DEPARTMENTS AROUND THE COUNTRY.
DURING THE MONTH OF APRIL, JIM INCURRED THE FOLLOWING COSTS AND WANTS YOUR HELP CLASSIFYING THEM
ACTIVITY
1.
DEPRECIATION ON THE FACTORY
2
SECURITY GUARDS AROUND THE CORPORATE OFFICE
3
SALARY OF ASSEMBLY WORKERS
4
MATERIAL USED IN THE FLOW JETS
5
SECRETARY’S SALARIES
6
EQUIPMENT USED TO MAKE THE FLOW JETS
7
SALARY OF THE SHOP FOREMAN
8
JIM’S SALARY
9
SALES COMMISSIONS
10
UTILITIES COSTS ON THE FACTORY
11
RENT ON THE CORPORATE OFFICE
12
SALARY OF THE FACTORY MANAGER
PRODUCT
DIRECT
INDIRECT
PERIOD
SG&A
1
2
3
4
5
6
7
8
9
10
11
12
1.
DEPRECIATION ON THE FACTORY
2
SECURITY GUARDS AROUND THE CORPORATE OFFICE
3
SALARY OF ASSEMBLY WORKERS
4
MATERIAL USED IN THE FLOW JETS
5
SECRETARY’S SALARIES
6
EQUIPMENT USED TO MAKE THE FLOW JETS
7
SALARY OF THE SHOP FOREMAN
8
JIM’S SALARY
9
SALES COMMISSIONS
10
UTILITIES COSTS ON THE FACTORY
11
RENT ON THE CORPORATE OFFICE
12
SALARY OF THE FACTORY MANAGER
Explanation / Answer
Before answering we should have a cleared idea what each cos are meant by:
Direct Cost:Is the type of expense which can be traced back to one unit of production.ie,that can be completely attributed to the production of specific goods eg:Direct labour or Direct raw material
Indirect Cost:Is the type of expense which cannot be traced back to one unit of production. for eg:maintaining whole factory is important but cannot be calculated as per unit basis, salary of supervisor
Period Cost: Which are fixed to cost, would not change according to level of production. eg:Rent of factory.
DEPRECIATION ON THE FACTORY
(It is an operating expense generally an administration expense)
SECURITY GUARDS AROUND THE CORPORATE OFFICE
(Not directly involved in production but is mportant)
WAGE OF ASSEMBLY WORKERS
( They are directly involved in producton and can be traced back cost of labour per product.)
MATERIAL USED IN THE FLOW JETS.
(direct Raw material are always direct cost)
SECRETARY’S SALARIES
(No basis of per product for secretary's work)
EQUIPMENT USED TO MAKE THE FLOW JETS
(Is a capital expenditure and is not directly tracable to unit)
SALARY OF THE SHOP FOREMAN
(as mentioned abov in eg
Kim's Salary (he is not directly involved in production)
SALES COMMISSIONS
(Is the expense incured for selling product)
UTILITIES COSTS ON THE FACTORY
(Are same as equipments b
RENT ON THE CORPORATE OFFICE
( is particularly explaine above. Is a fixed expense wount change with increase or decrease in production)
Salary Of Factory Manager
(because it is not caused by a particular product)
PRODUCT DIRECT INDIRECT PERIOD Selling, General and Administrative Expenses 1DEPRECIATION ON THE FACTORY
(It is an operating expense generally an administration expense)
2SECURITY GUARDS AROUND THE CORPORATE OFFICE
(Not directly involved in production but is mportant)
3WAGE OF ASSEMBLY WORKERS
( They are directly involved in producton and can be traced back cost of labour per product.)
4MATERIAL USED IN THE FLOW JETS.
(direct Raw material are always direct cost)
5SECRETARY’S SALARIES
(No basis of per product for secretary's work)
6EQUIPMENT USED TO MAKE THE FLOW JETS
(Is a capital expenditure and is not directly tracable to unit)
7SALARY OF THE SHOP FOREMAN
(as mentioned abov in eg
8Kim's Salary (he is not directly involved in production)
9SALES COMMISSIONS
(Is the expense incured for selling product)
10UTILITIES COSTS ON THE FACTORY
(Are same as equipments b
11RENT ON THE CORPORATE OFFICE
( is particularly explaine above. Is a fixed expense wount change with increase or decrease in production)
12Salary Of Factory Manager
(because it is not caused by a particular product)