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Lecture 2

ADM2304 Lecture 2: 2

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University of Ottawa
Tony Quon

> Those labour costs that can be easily traced to individual units of product e.g, (wage paid to car assembly workers), (CEO salary wouldnt count here since he doesnt assemble the car) > direct materials and direct labour are called prime costs a. Manufacturing Overhead (Manu Overhead and Direct labour are called conversion costs) > Manufacturing costs that cannot be easily traced directly to specic units produced. > AKA: indirect manufacturing cost, factory overhead, and factory burden i. Indirect materials (Materials used to support the production process, like glue and paint supplies used in the car assembly plant) ii. indirect labour (Wages paid to employees who are not directly involved in production work, like maintenance workers and security guards) Overtime Premiums > usually considered to be part of manufacturing overhead > Product specic overtime premiums are part of direct labour. NonManufacturing Costs: a. Marketing or Selling Costs = Costs necessary to get the order and deliver the product. b. Administrative Costs = All executive, organizational, and clerical costs NON MANUFACTURING e.g, classify these! a. depreciation taxes and insurance on the manufacturing facilities, MAN OVERHEAD b. rent on the ofce space used by non manufacturing staff, ADMIN COSTS SELL COSTS c. salaries paid to employees who produce the audio equipment, DIRECT LABOUR d. cost of the glue to faster the company logo on its speakers. MAN OVER (INDI MAT) e. the cost of online advertising (MARKETING OR SELLING COSTS) f. salaries paid to accounting employees ADMIN g. salary paid to production manager who supervises manufacturing activities MANU OVER h. cost of plastic used for turntable dust covers DIRECT COST i. bonuses paid to sales staff for meeting their monthly sales goals MARKETING OR SALES C j. salary paid to HR department manager ADMIN
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