EXERCISE 2–1 Classifying Manufacturing Costs [LO1]

The costs below all relate to Sounds Good, a company based in Alberta that manufactures high- end audio equipment such as speakers, receivers, CD players, turntables, and home theatre systems. The company owns all of the manufacturing facilities (building and equipment) but rents the space used by the non-manufacturing employees (accounting, marketing, sales, human resources).

Required:

For each cost, indicate whether it would most likely be classified as a direct labour, direct material, manufacturing overhead, marketing and selling, or administrative cost.

1.      Depreciation, taxes, and insurance on the manufacturing facilities.

2.       Rent on the office space used by the non-manufacturing staff.

3.       Salaries paid to the employees who produce the audio equipment.

4.       Cost of the glue used to fasten the company’s logo to the grill used on all of its speakers.

5.      The cost of online advertising.

6.       Salaries paid to the accounting employees.

7.     Salary paid to the production manager who supervises the manufacturing activities for all products.

8.       Cost of the plastic used for turntable dust covers.

9.      Bonuses paid to sales staff for meeting their monthly sales goals.

10.        Salary paid to the manager of the human resources department.