TP2. LO 2.2This list contains costs that various organizations incur; they fall into three categories: direct materials (DM), direct labor (DL), or overhead (OH).7Classify each of these items as direct materials, direct labor, or overhead.Glue used to attach labels to bottles containing a patented medicine.Compressed air used in operating paint sprayers for Student Painters, a company that paints houses and apartments.Insurance on a factory building and equipment.A production department supervisor’s salary.Rent on factory machinery.Iron ore in a steel mill.Oil, gasoline, and grease for forklift trucks in a manufacturing company’s warehouse.Services of painters in building construction.Cutting oils used in machining operations.Cost of paper towels in a factory employees’ washroom.Payroll taxes and fringe benefits related to direct labor.The plant electricians’ salaries.Crude oil to an oil refinery.Copy editor’s salary in a book publishing company.Assume your classifications could be challenged in a court case. Indicate to your attorneys which of your answers for part a might be successfully disputed by the opposing attorneys and why. In which answers are you completely confident?

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Answered: LO 2.2This list contains costs that…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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TP2.

LO 2.2This list contains costs that various organizations incur; they fall into three categories: direct materials (DM), direct labor (DL), or overhead (OH).⁷

Classify each of these items as direct materials, direct labor, or overhead.
1. Glue used to attach labels to bottles containing a patented medicine.
2. Compressed air used in operating paint sprayers for Student Painters, a company that paints houses and apartments.
3. Insurance on a factory building and equipment.
4. A production department supervisor’s salary.
5. Rent on factory machinery.
6. Iron ore in a steel mill.
7. Oil, gasoline, and grease for forklift trucks in a manufacturing company’s warehouse.
8. Services of painters in building construction.
9. Cutting oils used in machining operations.
10. Cost of paper towels in a factory employees’ washroom.
11. Payroll taxes and fringe benefits related to direct labor.
12. The plant electricians’ salaries.
13. Crude oil to an oil refinery.
14. Copy editor’s salary in a book publishing company.
Assume your classifications could be challenged in a court case. Indicate to your attorneys which of your answers for part a might be successfully disputed by the opposing attorneys and why. In which answers are you completely confident?

Definition Definition Benefits in addition to compensation that companies give to their employees. Fringe benefits can boost morale and productivity and keep employees motivated. Companies often use fringe benefits as a competitive advantage to recruit and retain employees. Examples of fringe benefits include pensions, vacation time, tuition reimbursement, free or subsidized meals, and gym memberships.

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