Question

Please select a product that you use and list some of the manufacturing costs (direct materials, direct labor, variable factory overhead, and fixed factory overhead). Indicate which would be included in the cost of goods sold under variable and absorption costing.

Answer 1

consider a compnay manufactures cycles

direct material costs are cost of steel,iron and tyres to manufacture a cycle (that is the material cost which can directly attributable to product)

direct labor cost are wages of workers in production

variable factory overhead are production supplies and wages for handling and shipping of the product (variable factory overheads changes with the number of units produced in a factory)

fixed factory overhead are period costs and will not change with the number of units produced in a factory. examples are fixed factory rent,supervisor's salary

the cost of goods sold under variable costing includes direct material costs,direct labor cost and variable factory overhead

the cost of goods sold under absorption costing costing includes direct material costs,direct labor cost,variable factory overhead and fixed factory overhead for the units sold