Multiple Choice
Which of the following is classified as a conversion cost in manufacturing accounting?
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4. Merchandising Operations
Cost of Goods Sold - Perpetual Inventory vs. Periodic Inventory
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Which of the following costs is NOT included in factory overhead?
A
Direct materials used in production
B
Indirect labor
C
Factory utilities expense
D
Depreciation on factory equipment
Verified step by step guidance1
Understand the concept of factory overhead: Factory overhead includes all indirect costs associated with manufacturing a product, excluding direct materials and direct labor. Examples include indirect labor, factory utilities, and depreciation on factory equipment.
Review the provided options: Direct materials used in production, Indirect labor, Factory utilities expense, and Depreciation on factory equipment.
Identify the nature of each cost: Direct materials are directly traceable to the product and are not considered part of factory overhead. Indirect labor refers to wages for workers not directly involved in production (e.g., maintenance staff), which is part of factory overhead. Factory utilities expense and depreciation on factory equipment are also indirect costs and part of factory overhead.
Determine which cost does not fit the definition of factory overhead: Since direct materials are directly traceable to the product, they are excluded from factory overhead.
Conclude that the correct answer is 'Direct materials used in production,' as it is not included in factory overhead.
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