Question

The component of Factory overhead are as follow:

a) Indirect material + Indirect labor + Others indirect cost

b) Direct labor + Indirect labor + Indirect expenses

c) Direct material + Indirect material + Direct expenses

d) Direct material + Indirect expenses + Indirect labor


anyone please help me to choose the correct option. ​

Answer 1

Answer:

Explanation:

Indirect materials are those materials which can not be easily identified with the cost of production. Indirect materials can not be easily measured in cost of production. Indirect materials are part of the overheads. Indirect materials are part of the factory cost.

Direct and Indirect Labor Costs are Product Production Expenses. Companies that manufacture and sell goods usually report direct and indirect labor costs under COGS, as the simple income statement below shows. And, just below COGS, Gross profit derives as net sales revenues minus COGS.

Direct Material Cost is the total cost incurred by the company in purchasing the raw material along with the cost of other components including packaging, freight and storage costs, taxes, etc. that are related directly to the manufacturing and production of various products of the company. Components of the Direct Material Expense

The elements of cost are those elements which constitute the cost of manufacture of a product. We can broadly divide these elements of cost into three categories. In a manufacturing organization, we convert raw materials into a finished product with the help of labor and other services. These services are Material, Labour and Expenses.

Answer 2

Answer:

The correct option is (a) Indirect material + Indirect labor + Others indirect cost.

Explanation:

Factory overheads-

• The total of indirect costs such as materials, labour, and other expenses that cannot be easily linked to the goods or services provided is known as factory overheads.
• In addition to these costs, there are also indirect costs that are difficult to link to the finished object. These costs cannot be connected to a specific task, procedure, or product. These costs are referred to as factory overheads.
• The sum of all expenses (other than direct expenses) incurred to maintain and operate the factory or manufacturing facility is known as factory overhead.
• Additionally known as production overheads or works overheads, these are.
• Examples- Rent, Repairs, Electricity etc.

Indirect Cost-

• Costs that are incurred throughout a number of operations and hence cannot be attributed to particular cost objects are known as indirect costs.
• In contrast, indirect costs are required to run the company as a whole. When management intends to set prices slightly above the variable costs of goods, it is useful to identify indirect costs so that they can be eliminated from immediate pricing choices.
• Since indirect costs do not significantly vary within specific production volumes or other activity indicators, they are regarded as fixed costs.
• These may be indirect material,labour or other costs.
• Example -accounting and legal expenses, administrative salaries, office expenses, rent, security expenses, telephone expenses, and utilities.

Hence, the factory cost is the aggregate of  Indirect material , Indirect labor ,Others indirect cost.

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