Chapter 14, Problem 22DQ

To determine

Cost:

Cost refers to that particular amount which is forgiven by a firm or an organization to acquire an asset.

Direct material:

The material which is straight away engaged in production activity is referred as direct material, such as raw material.

Direct labor:

The man force who is directly engaged in production activity is referred as direct labor, such as wages of labor.

Factory overhead:

This cost is neither considered as direct labor nor as direct material, so it is that cost which is incurred while manufacturing other than direct material and direct labor.

To explain: Relations among the income statement, the schedule of cost of goods manufactured, and listing of factory overhead costs