Answer to Question #184947 in Management for RUGUMBIRA YEZE Marie Noella

Question

Some selected sales and costs data for job order 515 are given below

SHS

Direct materials used 100,000

Direct labor 150,000

Factory overhead

(all indirect, 40% variable) 75,000

Selling and administration expenses

(50% direct, 60% variable) 120,000

What relevance does this data or does the scenario have in terms cost concepts and classification topic?

Answer 1

We can use this information to plan for the company's future production, manage the different production costs and build evidence to support better decisions for the company.  

The direct material and the director labor used generally inform us about what would cost the company to convert its raw materials into finished goods for sale. We can classify the factory overhead as indirect costs for the company and set necessary measures to control the production costs. We can link the current selling and administration expenses to the company's direct costs involved in a particular product. The variability of the prices also informs us roughly what percentage of the fees we should set aside during planning.