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Separating Overhead Cost from Selling and Admin Costs

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Managers at Appalacian Woolen Mills are examining the following list of costs in order to determine the total amount of Manufacturing Overhead.

Labor- Production Workers $150,000
Labor- Production Supervisor $70,000
Labor- Sales Staff $45,000
Labor- Admin Staff $85,000
Depreciation- Loom Equipment- $30,000
Depreciation- Office Equipment- $15,000
Insurance - Mill- $12,000
Insurance - Office- $8,000
Property Taxes- Mill- $10,000
Property Taxes- Office- $6,000
Advertising- $36,000
General Administration- $28,000
Sales Commissions- $32,000
Supplies- Mill- $34,000
Supplies- Office- $22,000
Direct Materials- $80,000

A) Determine the total direct manufacturing cost.

B) Briefly explain the difference between manufacturing overhead costs and selling and administrative costs.

C) Calculate both the total manufacturing overhead cost and the total selling and administrative cost.

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Solution Summary

This solution calculates direct manufacturing costs for Appalacian Woolen Mills. I also explain the difference between manufacturing overhead costs and selling and administrative costs. The total manufacturing overhead cost and total selling and administrative costs are also calculated.

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A) Determine the total direct manufacturing cost.

Direct manufacturing labor = 150,000
Production salary = 70,000
Direct Materials = 80,000

Total = $300,000

Direct manufacturing costs are costs that we can directly tie to products (production).

B) Briefly explain the difference between manufacturing overhead costs and selling and administrative costs.

Manufacturing overhead costs are costs incurred in the production of goods and services that can't be tied to a specific product, but are expenses ...

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