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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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