0
Direct material cost is that cost of material which is used to manufacture goods like wood for furniture etc.
Wiki User
∙ 9y ago
Add your answer:
Earn +20 pts
What costs other than direct materials costs and direct labor costs incurred in the manufacturing process are classified as?
Indirect costs(salaries, materials not directly involved in manufacturing), period costs(selling and admin costs)
What is a product cost as it relates to inventory - Abnormal spoilage - Raw materials - Interest costs -. Selling costs?
In the context of inventory, various costs are associated with different aspects of the production and sale of goods. Here's an explanation of the terms you mentioned: Product Cost: Product cost refers to the direct and indirect costs incurred in the production of goods. It includes the cost of raw materials, direct labor, and manufacturing overhead. Product costs are typically allocated to the inventory and are not expensed until the goods are sold. These costs are important for determining the value of inventory and calculating the cost of goods sold. Abnormal Spoilage: Abnormal spoilage refers to the loss or damage of inventory or raw materials that occurs due to unexpected or unusual circumstances, such as accidents, equipment failures, or errors in production. Abnormal spoilage is not a normal part of the production process and is considered an abnormal cost. The cost of abnormal spoilage is typically expensed in the period it occurs rather than being allocated to inventory. Raw Materials: Raw materials are the basic materials and components used in the manufacturing process to create finished goods. The cost of raw materials includes the purchase price, transportation costs, and any other costs directly associated with acquiring the materials. These costs are initially added to the inventory until the goods are produced. Interest Costs: Interest costs are expenses incurred from borrowing money or obtaining financing to support the production or acquisition of inventory. These costs may arise from loans, lines of credit, or other financing arrangements. Interest costs associated with inventory are typically included as part of the product cost or capitalized as part of the cost of acquiring or producing the goods. Selling Costs: Selling costs, also known as selling and administrative expenses, are the expenses incurred in promoting and selling products, as well as the general administrative costs of running a business. These costs are not directly related to inventory and are typically expensed in the period they are incurred. It's important to note that accounting practices and terminology may vary depending on the specific industry and jurisdiction. Therefore, consulting with an accountant or referring to applicable accounting standards can provide more precise guidance on how these costs are accounted for in a particular situation
What are direct costs?
Direct Costs: These are those costs which are necessary for the production of the goods and without which it is not possible to make the product. Like Direct Materials, Direct Labor. Example: In the process of making shoe leather is called the direct material which is necessary to make shoe and the cost of this leather is direct cost to the product of shoe.
What is direct manufacturing cost?
Direct Manufacturing costs are, Direct Labour but not overtime unless it is requested from the customer themselves. Direct materials used to produce the unit of output. Direct Overheads examples are wages of supervisors, foreman etc. All direct manufacturing costs are classed as prime costs. Hope this helps Andrew swift
What is the difference between prime cost and conversion cost?
Prime cost and conversion cost are two essential concepts in cost accounting, and understanding the difference between them is crucial for managing a business's finances effectively. Prime Cost: Imagine you're baking a cake from scratch. The prime cost would be the direct cost of the basic ingredients needed to make the cake. In a business context, prime cost includes the direct costs associated with producing a product. These costs are directly tied to the materials and labor used in manufacturing or creating the product. Prime costs typically consist of: Direct Materials: These are the raw materials or components directly used in the production process. In the cake analogy, it's the flour, sugar, eggs, and other ingredients. Direct Labor: This is the cost of the workforce directly involved in producing the product. In the cake example, it would be the baker's wages. Conversion Cost: Now, think about what it takes to turn those basic cake ingredients into a delicious cake. Conversion cost represents the additional expenses required to convert those raw materials into a finished product. In a business setting, conversion cost encompasses: Direct Labor: This includes not only the workers directly involved in production but also their wages and benefits. Factory Overhead: This category covers all other production costs that aren't direct materials or direct labor. It includes expenses like utilities for the factory, equipment maintenance, and depreciation of manufacturing machinery. In summary, the main difference between prime cost and conversion cost is that prime cost includes only the direct costs directly linked to the production of a product (raw materials and direct labor), while conversion cost includes the direct labor along with the additional manufacturing costs required to convert those raw materials into the finished product (direct labor and factory overhead). So, if you were managing a bakery, the flour, sugar, and eggs used in your cakes would be part of the prime cost, while the wages of your bakers and the costs of running your bakery (oven electricity, cake molds, etc.) would be included in the conversion cost. Understanding these costs helps a business analyze its expenses and make informed decisions about pricing and production efficiency.
What are the differences between direct costs and indirect costs give an example of each?
Direct costs are costs specifically tied to objects, like raw materials or equipment. Indirect costs affect the company as a whole, not attached to an 'object', and include things like advertisement, payroll, and depreciation of equipment.
Can Raw materials be direct or indirect?
raw material are indirect material
What of the following is the most direct cause of cost push inflation?
Rising production costs.
What costs other than direct materials costs and direct labor costs incurred in the manufacturing process are classified as?
Indirect costs(salaries, materials not directly involved in manufacturing), period costs(selling and admin costs)
What is conversion costs?
Pricing is based on direct labor and overhead. Materials does not affect pricing. Example: Your customer provides materials used in production.
What are some examples of external environmental costs?
Raw materials
What are some example of Starbucks variable costs?
Raw materials
Are sales commissions direct costs?
Sales commission has no relationship with manufacturing of products that’s why it is not a direct cost as direct costs are those costs which related to manufacturing of products like raw material, labor etc.
Should a plant be located near the market or near the source of raw materials?
Actually it would be better if it was located exactly in between the both of them to try and reduce the direct and indirect costs both.
What has the author Alexander H Jones written?
Alexander H. Jones has written: 'Free raw materials and a foreign market' -- subject(s): Raw materials, Costs, Tariff
Why is Direct investment used?
Direct investment is advantageous because labor and raw materials may be cheaper in some countries
Is raw material Direct Material?
the cost of direct materials which can be easily identified with the unit of production. For example, the cost of glass is a direct materials cost in light bulb manufacturing. Hope this helps!👍
