The job cost sheet for the strict custom framing company is: Direct Costs: Mater

Question

The job cost sheet for the strict custom framing company is: Direct Costs: Materials = 350.00, Shipping =100.00, Totaling = 450.00. Conversion Cost: Manufacturing Division (0.20 hours @ $45.00) = 9.00, Finishing Division (0.30 hours @ $25.00) = 7.50, Packaging Division (((0.25 + (0.3 * 2) +0.5)/ 60) hours @ $30) = 0.68, totaling 17.18. Total Manufacturing costs = $467.18. Explain why shipping is included in direct cost; and usually materials are considered direct expense, Explain why there are only 2 categories: Direct and conversion.

Explanation / Answer

Shipping is considered as direct cost, because all the costs involved in bringing the goods to the present condition is involved in direct cost.

Materials are the ones that directly impact the cost of a product, hence it is a direct cost.

Direct costs impact the direct cost and the conversion costs are indirect cost. The two categories impact the profitability of the product.

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