Automobile engines are a(an) ______ cost to units produced. Multiple Choice indirect direct
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Step 1: The question asks to classify automobile engines as either a direct or indirect cost to units produced. Show more…
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A vacuum manufacturer has prepared the following cost data for manufacturing one of its engine components based on the annual production of 50,000 units. Description Cost per Month Direct Materials $75,000 Direct Labor $100,000 Total $175,000 In addition, variable factory overhead is applied at $7.50 per unit. Fixed factory overhead is applied at 150% of direct labor cost per unit. The vacuums sell for $150 each. A third party has offered to make the engines for $60 per unit. 75% of fixed factory overhead, which represents executive salaries, rent, depreciation, and taxes, continue regardless of the decision. Should the company make or buy the engines?
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The Serpent Corporation makes 47,000 motors to be used in the production of its sewing machines. The average cost per motor at this level of activity is: Direct materials $ 10.60 Direct labor $ 9.60 Variable manufacturing overhead $ 4.00 Fixed manufacturing overhead $ 4.95 An outside supplier recently began producing a comparable motor that could be used in the sewing machine. The price offered to SP Corporation for this motor is $27.25. If SP Corporation decides not to make the motors, there would be no other use for the production facilities and none of the fixed manufacturing overhead cost could be avoided. Direct labor is a variable cost in this company. The annual financial advantage (disadvantage) for the company as a result of making the motors rather than buying them from the outside supplier would be:
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Which of the following statements concerning direct and indirect costs is NOT true? Multiple Choice Whether a particular cost is classified as direct or indirect does not depend on the cost object. A direct cost is one that can be easily traced to the particular cost object. The factory manager's salary would be classified as an indirect cost of producing one unit of product. A particular cost may be direct or indirect, depending on the cost object.
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