Multiple Choice
When manufacturing overhead is applied to production, it is added to which of the following accounts?
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4. Merchandising Operations
Cost of Goods Sold - Perpetual Inventory vs. Periodic Inventory
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In the context of inventory accounting, labor costs charged to manufacturing overhead represent which type of labor costs?
A
Indirect labor costs
B
Selling labor costs
C
Administrative labor costs
D
Direct labor costs
Verified step by step guidance1
Understand the concept of labor costs in inventory accounting. Labor costs are categorized based on their relationship to the production process and the type of work performed.
Learn the definition of indirect labor costs. These are labor costs that cannot be directly traced to specific products or jobs but are necessary for the production process, such as maintenance workers or supervisors.
Compare indirect labor costs with direct labor costs. Direct labor costs are those that can be directly traced to the production of specific goods or services, such as assembly line workers.
Recognize that administrative labor costs and selling labor costs are not part of manufacturing overhead. Administrative labor costs relate to general business operations, while selling labor costs pertain to activities involved in selling products.
Conclude that labor costs charged to manufacturing overhead represent indirect labor costs, as they are part of the costs necessary to support the production process but are not directly tied to specific products.
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