Multiple Choice
Which of the following costs should be added to the buyer's inventory account under both the perpetual and periodic inventory systems?
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4. Merchandising Operations
Cost of Goods Sold - Perpetual Inventory vs. Periodic Inventory
Multiple Choice
Which of the following costs would NOT be classified as factory overhead in a manufacturing company?
A
Factory utilities expense
B
Direct materials used in production
C
Depreciation on factory equipment
D
Factory supervisor's salary
Verified step by step guidance1
Step 1: Understand the concept of factory overhead. Factory overhead refers to all indirect costs incurred during the manufacturing process that cannot be directly traced to a specific product. Examples include factory utilities, depreciation on factory equipment, and factory supervisor's salary.
Step 2: Differentiate between direct costs and indirect costs. Direct costs, such as direct materials and direct labor, are directly traceable to the production of specific goods. Indirect costs, on the other hand, are part of factory overhead and support the production process but are not directly traceable to individual products.
Step 3: Analyze each cost provided in the problem. Factory utilities expense, depreciation on factory equipment, and factory supervisor's salary are all indirect costs and therefore classified as factory overhead. Direct materials used in production, however, are direct costs and not part of factory overhead.
Step 4: Identify the cost that does NOT belong to factory overhead. Since direct materials used in production are direct costs, they are excluded from factory overhead classification.
Step 5: Conclude that the correct answer is 'Direct materials used in production,' as it is the only cost listed that is not classified as factory overhead.
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