Q2TI_1 - Horngren'S Financial And Managerial Accounting

Question

Identify each cost as a period cost or a product cost. If it is a product cost, further indicate if the cost is direct materials, direct labor, or manufacturing overhead. Then determine if the product cost is a prime cost and/or a conversion cost. 

6. Wages of assembly line workers for a factory

Step-by-Step Solution

Answer

It is product cost, direct labor, prime cost as well as conversion cost.

Step 1: Definition of wages

The wages are defined as the remuneration paid by the business to their employees and workers for the work performed by them.

Step 2:Identification of costs

The wages of assembly line workers are considered as the product cost, the product cost is the cost of making a product or purchasing a product. 

It is the direct labor as it is the cost incurred on labor that is directly associated with the production of goods.

It is a prime cost as well as the conversion cost.