Quiz 18: Introductionto Managerialaccounting

Business

Ethics and Professional Conduct in Business The professional ethics encompass various standards set by the people best in business. It involves personal, social and ethical benchmarks being accepted globally. F.R., the cost accountant of H.J. Manufacturing Company did not behave in an ethical manner by ordering the lumber for making a desk for an employee of the company. The desk will not be used by the company but is being ordered on behalf of the company. Now the company is due for the lumber ordered by the employee. So, the company incurs loss for the amount it has to pay for the lumber that is not used by it. Mr. F. used company's funds in a manipulative manner which is a violation of professional and ethical code of conduct. In such a case, there shall be unwanted loss in the books. The company's management should, in this situation, impose a strict control over the employees of the company with regard to the manipulation of company's funds and accounting statements.

img

Direct material The cost of raw materials which form an integral part of the finished product and also a significant portion of the total product cost is called direct material costs. Direct labor The cost of salaries and wages which form an integral part of the finished product and also a significant portion of the total product cost is called direct labor costs. Factory overheads Factory overheads are all indirect costs associated in the manufacture of a product or service providence. Factory overheads do not form an integral part of the finished product and also do not form a significant portion of the total product cost. Factory overheads are otherwise called factory burden or manufacturing overhead Costs related to automobile manufacturer a) Steering wheel is an example of direct material because all automobiles use steering wheels hence it forms an integral part of the automobile and also forms a significant portion of the total product cost. b) Salary of a test driver is an example of factory overhead because their salary for cost of test driving the automobile does not form an integral part of the automobile and does not form a significant portion of the total product cost. c) Depreciation of the welding equipment is an example of factory overhead because it is an expense that has to be allocated over the total administration expenses and it does not form an integral part of the automobile and does not form a significant portion of the total product cost. d) V8 automobile engine is an example of direct material because all automobiles use steering wheels hence it forms an integral part of the automobile and also forms a significant portion of the total product cost. e) Wages of an assembly line worker are an example of direct labor because the salary for assembling of the automobile does not forms an integral part of the automobile and forms a significant portion of the total product cost. f) Steel is an example of direct material because automobiles are made up of steel and aluminum hence it forms an integral part of the automobile and also forms a significant portion of the total product cost. g) Tires are an example of direct material because automobiles use tires hence it forms an integral part of the automobile and also forms a significant portion of the total product cost. h) Assembly machinery lubricants is a factory overhead because the cost of the lubricant used in assembling of the automobile does not form an integral part of the magazine and does not form a significant portion of the total product cost.