Direct materials is a true or proportionately variable cost because the amount used during a period varies in direct proportion to the level of production activity. The steeper the slope, the higher the variable cost per unit.
Which of the following would not be included in manufacturing overhead?
Manufacturing overhead does not include any of the selling or administrative functions of a business. Thus, the costs of such items as corporate salaries, audit and legal fees, and bad debts are not included in manufacturing overhead.
Which of the following costs is classified as both a prime cost and a conversion cost?
Direct labor
Direct labor is a part of the prime cost as prime cost represents the sum of the direct material cost and direct labor cost. Direct labor is also a part of the conversion cost as conversion cost represents the sum of the direct labor cost and the manufacturing overhead. Hence it is considered as both costs.
Which of the following costs would be considered a product cost?
Product cost refers to the costs incurred to create a product. These costs include direct labor, direct materials, consumable production supplies, and factory overhead. Product cost can also be considered the cost of the labor required to deliver a service to a customer.
When cost per unit increases as volume increases this is known as?
Since the per unit cost of materials remains constant regardless of the number of units produced, it is a variable cost. Also, when volume increases total variable cost increases. Since the total labor cost increases in proportion to increases in the number of units produced it is a variable cost.
Which of the following cost is classified as a prime cost?
A prime cost is the total direct costs of production, including raw materials and labor. Indirect costs, such as utilities, manager salaries, and delivery costs, are not included in prime costs.
