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Managerial Accounting - Direct Materials, Labour and Manufacturing Overhead costs

Assume company XYZ sells pre-hung material doors. Recently, it has also decided to start selling pre-hung wood doors An old warehouse that the company owns will be used to manufacturer the product. Here are the following costs associated with selling the pre-hung wood doors:

1. The cost (wood) for each door is 10\$
2. Labor costs are 8\$ per door
3. Amortization on the factory equipment to make the wood doors are \$25,000 per year
4. Property taxes on the factory is \$6,000 per year
5. Advertising costs for the wood doors are \$2,500 per month, or \$30,000 per year
6. Sales commissions are 4\$ per door
7. Salaries for employees who maintain the factory facilities are \$28,000
8. Salary of plant manages in charge of pre-hung wood doors is \$70,000
9. Cost of shipping each door is 12\$

a) classify each of the costs as a direct material cost, direct labor cost, manufacturing overhead or period cost
b) Calculate the Total manufacturing cost, assuming they product 10,000 doors

Solution Preview

A) remember that the total manufacturing cots if the sum of the product costs, direct materials, direct labor and manufacturing overhead.
- direct materials includes all materials that go into making the finished good
- direct labor costs includes the salary of the employees who actually produce the doors
- manufacturing overhead includes both indirect materials (any materials that are used to help manufacture the product but is actually not found in the raw materials ...

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