ADM 2341 Chapter Notes - Chapter 2: Direct Labor Cost, Opportunity Cost, Financial Statement

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Direct material: materials that are integral part of finished product and can be traced to it. Direct labor: factory labor costs that can be traced to individual units of product (touch labor) Manufacturing overhead: all costs except direct labor and direct materials (basically indirect materials and labor, maintenance and repair, heat and light, property tax, depreciation and insurance) only costs associated with operating the production factory included. Direct labor & manufacturing overhead= conversion costs - - direct labor & direct materials = prime costs. Classification of labor cost of manufacturing: idle time not doing nothing is overhead, but idle time waiting for product is direct. Overtime premiums (extra paid to workers who work above job time) go to direct if its job specific (rush order), but for general conditions (peak production needs) go to overhead. Benefits for direct labor goes to direct labor cost but for indirect labor goes to overhead.

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