Q2TI_4 - 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. 

9. Sugar and flour used to make cookies

Step-by-Step Solution

Answer

It is a product cost, direct material and the prime cost

Step 1: Definition of the direct material

Direct materials are defined as the raw material which is directly related to the production process of the business.

Step 2: Identification of costs

The salary and flour used to make cookies will be considered as the product cost as it is directly related to the making of the product.

It will also be considered as the direct material.

It is a prime cost, as it is a combination of direct materials and direct labor.