1. Direct materials are traceable matter and all items that are required to assemble or manufacture a certain product. The direct material contained in a manufactured good may also be termed as a product cost, an inventory cost and prime cost.
2. Indirect materials are consumables like disposable tools and protective devices which are not used as raw material but which makes it possible to a production of goods and services in a more safe and efficient manner hence the materials can’t be linked to the specific product.
3. indirect labor is either service or production that is assigned to a certain product, work order or cost center. When a business gives service, direct labor is the labor of those people who give direct service …show more content…
Question 5
1. The sales volume increases by 50 units Total Per Unit
Sales (8,050 units) $209,300 $26.00
Variable expenses 144,900 …show more content…
Firms which embrace variable cost normally set apart overhead and another fixed cost from production cost. The other difference is that only variable cost of manufacturing is added to get the overall cost of production while fixed costs are considered. It would also provide the contribution of a product used to determine the breakeven point of a product. Absorption cost, on the other hand, will absorb both fixed and variable cost incurred in times of production. Absorption costing will also give the product of production directly while in variable costing, one has to add the fixed costs again as a periodic cost to get the profit of the product. Also, absorption cost and fixed manufacturing are part of product cost while variable cost is only considered making other fixed manufacturing overhead a periodic cost (Kieso,