What are prime costs and conversion costs

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Reference no: EM13952834

1. Would costs related to the building used only by administrative personnel, such as heat and lights, property taxes, and insurance, be considered part of manufacturing over- head? Why or why not?

2. Distinguish between the following: (a) direct materials, (b) indirect materials, (c) direct labour, (d) indirect labour, and (e) manufacturing overhead.

3. Are product costs always expensed in the period in which they are incurred? Explain.

4. What are marketing or selling costs? How are they treated on the income statement?

5. Describe the schedule of cost of goods manufactured. How does it tie into the income
statement?

6. What are prime costs and conversion costs?

7. What is the difference between total manufacturing costs incurred and the cost of goods manufactured?

8. Is it possible for costs such as salaries or depreciation to end up as assets on the balance sheet? Explain.

9. What is a mixed cost?

10. As the level of activity increases, on a per unit basis, explain what happens to variable costs and fixed costs.

11. What is the relevant range, and why is it important to understand this when predicting costs?

12. Why is manufacturing overhead considered an indirect cost of a unit of product?

13. In deciding whether to replace an existing machine with a newer, more cost effective machine, the original cost of the existing machine should be compared to the cost of the new machine. Do you agree? Explain.

14. Only variable costs can be differential costs. Do you agree? Explain.

15. Rick Johnstone is employed by Westin Company. Last week he worked 46 hours assem- bling one of the company's products. Westin's employees work a standard 40-hour week, and Johnstone is paid $18 per hour. Employees are paid time and a half for any hours worked in excess of the standard 40 hours. Assuming the overtime is the result of an overall spike in demand for all products, allocate Johnstone's earnings for the week between direct labour cost and manufacturing overhead cost.

16. Pat Campbell operates a moulding press at Barrie Fabrication Company. Last week Pat worked 35 hours and was idle 5 hours due to scheduled maintenance on the equipment. Her basic wage rate is $26 per hour. Allocate Pat's wages for the week between direct labour cost and manufacturing overhead cost.

Reference no: EM13952834

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