Multiple Choice
Garden Depot is a retailer that is preparing its financial statements for external users. Which type of accounting is primarily being used in this process?
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1. Introduction to Accounting
Types of Accounting
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Factory costs such as cleaning supplies, taxes, insurance, and janitor wages are classified as:
A
Direct materials
B
Direct labor
C
Selling expenses
D
Manufacturing overhead
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. Examples include cleaning supplies, factory taxes, insurance, and janitor wages.
Review the classification of costs: Direct materials are raw materials directly used in production, direct labor refers to wages paid to workers directly involved in manufacturing, and selling expenses are costs related to marketing and selling the product.
Identify the nature of the costs mentioned: Cleaning supplies, taxes, insurance, and janitor wages are not directly tied to the production of a specific product but are necessary for maintaining the factory and production environment.
Classify these costs: Since these costs are indirect and related to the factory's operation, they fall under manufacturing overhead rather than direct materials, direct labor, or selling expenses.
Conclude the classification: Based on the definitions and examples, the correct classification for these costs is manufacturing overhead.
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