2071 Test 2 ne: blem 1: Terminology A. What are the three inventory accounts? B.

Question

2071 Test 2 ne: blem 1: Terminology A. What are the three inventory accounts? B. What arethe three manufacturing costs? C. Which are fixed and which are variable? Direct labor Direct materials Insurance -Property taxes D. If conversion costs are $40,000, prime costs are $50,000, and manufacturing overhead is $10,000 what is direct materials? Compute the predetermined overhead rate given that estimated factory overhead is $1,000,000 and direct labor hours are 500,000 hours. E. F. If factory overhead has a year-end balance of debit of $4,000, what is that called? 1 I Page

Explanation / Answer

Answer:-

1. There are three types of inventory in manufacturing company they are as follows,

(a.) Raw Material, (b.) work-in -process and (c.) Finished goods.

2.The three asic manufacturing costs are

(a.) Direct materials Cost, (b.) Direct Labor Cost and (c.) Manufacturing Overheads.

3. Direct labor is a variable cost.

Direct Materials is a variable cost.

Insurance is a fixed cost

Property taxes is a fixed cost

4. Conversion cost consist both Overhead cost and direct labor.
so, conversion cost= overhead cost + direct labor
$40,000= $10,000 + direct labor
Direct Labor= $40,000-$10,000
Direct Labor=$30,000
Prime Cost= Direct material+Direct labor+Direct Overhead
$50,000 = Direct Material+$30,000+$10,000
Direct Material = $50,000-$30,000+$10,000
Direct Material = $10,000

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