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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 Preview

    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 ...

    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.

    $2.19

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