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2-1 Classifying Manufacturing Costs

Boating, Inc., assembles custom sailboats from components supplied by various manufacturers. The company is very small and its assembly shop and retail sales store are housed in a boathouse in Charleston SC. Below are listed some of the costs that are incurred at the company.
For each cost, indicate whether it would most likely be classified as direct labor, direct materials, manufacturing overhead, selling, or an administrative cost.

1. The wages of employees who build the sailboats.
2. The cost of advertising in the local newspapers.
3. The cost of an aluminum mast installed in a sailboat.
4. The wages of an aluminum mast installed in a sailboat.
5. Rent on the boathouse.
6. The wages of the company's bookkeeper.
7. Sales commissions paid to the company's salespeople.
8. Depreciation on power tools.

Solution Preview

1. The wages of employees who build the sailboats. - Direct labor cost.

2. The cost of advertising in the local newspapers. - Marketing and selling cost.

3. The cost of an aluminum mast installed in ...

Solution Summary

This exercise identifies direct labor, direct materials, manufacturing overhead, selling, and administrative cost of a small business that assembles custom sailboats from components supplied by various manufacturers.

$2.19