ACC 117 Lecture Notes - Lecture 10: Finished Good, European Cooperation In Science And Technology, Management Accounting
Document Summary
Manufacturing costs: direct materials, direct labor, & manufacturing overhead. Direct materials include the major material inputs that can be directly and conveniently traced to each unit of product (the cost object). Miscellaneous ingredients and materials that are not worth tracing to each individual product would be considered indirect materials and included in manufacturing overhead. Direct labor refers to the hands on labor that can be directly and conveniently traced to the product. It does not include employees who rarely touch the product as it is being produced, such as supervisors, maintenance workers, and factory engineers. These are considered indirect labor and are included in manufacturing overhead. Manufacturing overhead includes all manufacturing costs other than direct materials and direct labor incurred to produce a physical product. It includes all of the costs associated with making the product that cannot be traced to a specific unit, such as indirect materials, indirect labor, factory rent, factory insurance, and factory utilities.