Stuart Manufacturing Company makes tents that it sells directly to camping enthu
ID: 2582409 • Letter: S
Question
Stuart Manufacturing Company makes tents that it sells directly to camping enthusiasts through a mail-order marketing program. The company pays a quality control expert $108,800 per year to inspect completed tents before they are shipped to customers. Assume that the company completed 1,630 tents in January and 1,110 tents in February. For the entire year, the company expects to produce 16,000 tents. Required c. If the cost objective is to determine the cost per tent, is the expert's salary a direct or an indirect cost? d. How much of the expert's salary should be allocated to tents produced in January and February?Explanation / Answer
C.
Direct costs are the costs that are directly traceable.
Indirect costs are the costs that are not directly traceable.
Is the expert's salary a direct or an indirect cost? - Indirect.
D.
Payment to a quality control expert per year = 108,800
Tents in January = 1,630
Tents in february = 1,110
Tents for the year = 16,000
Month Amount Allocated January 11,084 (108,800*1,630/16,000) February 7,548 (108,800*1,110/16,000)