Question

Cost of insurance on a company’s factory building would be classified as a(n): manufacturing overhead cost....

Cost of insurance on a company’s factory building would be classified as a(n):

manufacturing overhead cost.

direct labor cost.

selling and administrative cost.

direct materials cost.

Business   Accounting   
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Answer #1

Cost of Insurance is not directly traceable with the production units, hence it cannot be categorise in Direct costs.

Cost of Insurance is incurred on factory building as a whole and the factory building is used to produce material. The cost which cannot be directly traceable with the production units and help to produce units, is called Indirect COst.

Since factory building is used to produce product / unit, it is treated as Manufacturing Overhead Costs.

Hence, the correct option is manufacturing overhead cost.

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