Multiple Choice
Which of the following best describes the nature of a bond payable and its related cost allocation concept?
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9. Current Liabilities
Types of Liabilities
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Which of the following is typically included in manufacturing overhead?
A
Direct labor wages
B
Factory utilities expense
C
Direct materials cost
D
Sales commissions
Verified step by step guidance1
Understand the concept of manufacturing overhead: Manufacturing overhead includes all indirect costs associated with the production process that cannot be directly traced to specific products. These costs are necessary for production but are not directly tied to the creation of a product.
Review the options provided: Direct labor wages and direct materials cost are direct costs, meaning they can be directly traced to the production of specific products. Sales commissions are related to selling activities, not production, so they are not part of manufacturing overhead.
Identify factory utilities expense: Factory utilities expense is an indirect cost because it supports the production process but cannot be directly traced to specific products. Examples include electricity, water, and heating used in the factory.
Classify factory utilities expense as manufacturing overhead: Since factory utilities expense is an indirect cost incurred during production, it is typically included in manufacturing overhead.
Conclude that factory utilities expense is the correct answer: Based on the definition and classification of manufacturing overhead, factory utilities expense fits the criteria and is included in manufacturing overhead.
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