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Fundamentals of Cost Accounting 3rd Edition by William N. Lanen, Shannon W. Anderson, Michael Maher
Edition 3ISBN: 0073527114Fundamentals of Cost Accounting 3rd Edition by William N. Lanen, Shannon W. Anderson, Michael Maher
Edition 3ISBN: 0073527114Basic Concepts
For each of the following costs incurred in a manufacturing operation, indicate whether they are included in prime costs (P), conversion costs (C), or both (B).
a. Property taxes on the factory.
b. Transportation-in costs on materials purchased.
c. Assembly line worker’s salary.
d. Direct materials used in production process.
e. Lubricating oil for plant machines.
Verified
Step 1 of 5
Prime costs are the direct costs namely, direct materials and direct labor.
Conversion costs are the costs that are incurred to convert direct materials into the final product. These are the costs for direct labor and manufacturing overhead.
a.
Property taxes on the factory: In general, property taxes on the factory are period costs which does not included in either prime cost or conversion cost. However, it is given in the information that these costs are incurred in a manufacturing operation. Hence, this cost is included in conversion cost (C) as manufacturing overheads.
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Step 5 of 5
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