This document discusses different types of manufacturing costs including: 1. Direct materials - Materials that become part of the final product like metals in cars. 2. Direct labor - Wages paid to employees directly involved in production like factory workers. 3. Overhead - Additional costs that cannot be traced to a specific product like utilities, rent, and supervision. The document separates costs, provides examples of different direct costs, and discusses how labor costs like overtime are treated. It also mentions identifying different categories of overhead costs.

1. Course Learning
Objectives (CLO 2)

3. DIRECT MATERIAL
WAGE & LABOUR
OVERHEAD

4. © 2009 McGraw-Hill Ryerson Limited
1-4
Learning Objective 1

9. We separate manufacturing costs into
three categories:
Manufacturing costs relate to making
a product.

14. Corporate Organization Chart
Purchasing Personnel Vice President
Operations
Treasurer Controller
Chief Financial
Officer
President
Board of Directors

17. Mixed costs contain components of both
variable and fixed cost behavior patterns.
Mixed costs are sometimes called semivariable
or semifixed costs.

18. Mixed costs contain components of both
variable and fixed cost behavior patterns.
Mixed costs are sometimes called semivariable
or semifixed costs.
MIXED COST GRAPH

19. Mixed costs contain components of both
variable and fixed cost behavior patterns.
Mixed costs are sometimes called semivariable
or semifixed costs.

20. CLICK HEREBACK

21. © 2009 McGraw-Hill Ryerson Limited
1-21
Learning Objective 2
Identify raw material and
store organisation

22. DIRECT MATERIAL

23. The manufacture of products or goods
required material as the first basic
element. These materials generally fall in
to categories. These categories are direct
materials and indirect materials. The
materials used in the course of
manufacture which enters into and
becomes part of the product. Metals in
the manufacture of fans, boilers,

24. automobiles, aeroplans; wood in
manufacture of furniture, silk, ribbon and
leather band used in making a hat, cloth in
tailoring garments, Clay in the
manufacturing of bricks, leather in the
manufacture of shoes, wheat used in
milling flour are called direct material.

25. Direct material forms an integral part of the
finished product and can be directly
identified or included in computing the cost
of such product. In other words, it is the
material which can be directly measured
and charged to the cost of the order or
product being manufactured without
requiring excessive and uneconomical
details for such measurements and
identification.

26. Examples Direct Materials
Publishing
company
Paper, ink, book
covers
Automobile
manufacturer
Tires, automobile
metal parts
Computer
manufacturer
Hard drives,
monitors

27. © 2009 McGraw-Hill Ryerson Limited
1-27
Learning Objective
Identify labour and wage
analysis

28. is the cost of wages to be
paid to individuals who work
on specific products or in
other words, the cost of
wages of employees who are
directly involved in
converting raw materials
into finished goods.
Direct labor

29. Almost any production plant or
factory requires employees to
operate equipment, move raw
materials from the warehouse to
equipment, and so on. These
employees are directly involved in
the production process and the
cost of their remuneration and
benefits represents direct labor:
Direct labor

30. Usually direct labor is a variable
cost. In most situations the
amount of direct labor required is
directly correlated with the
amount of finished goods
produced. For example, wages
and related benefits of
employees who operate
machinery to produce valves
represent direct labor costs for
Friends Company.
Direct labor

31. The more valves are to be
produced, the more employees
will be required to operate
machinery, paint, assemble, etc.
Direct labor

32. Idle time represents the labour cost of direct
labour employees who are unable to perform their
assigned duties due to machine breakdowns,
material shortages, power failures, etc.
The labour costs for idle time hours are charged to
Mfg. Overhead at normal wage rates.
regardless of when the hours were worked.
Note: DL represents productive hours worked at
regular pay rate
Idle time represents non-productive hours at
regular pay rates
Idle Time

33. Any premium paid for labour
time in excess of normal
work times for direct labour
employees is treated as part
of MO. We are dealing
only with the premium. The
regular wage even for excess
hours over and above
normal work times is still
charged to Direct Labour.
Overtime Premium

34. Halsey
Scheme
Halsey
Weir
Scheme
Rowan
Scheme

35. © 2009 McGraw-Hill Ryerson Limited
1-35
Learning Objective 3
Identify Overhead
Categories

36. MORE NOTES ON THIS CLICK
ADDITIONAL 1
ADDITIONAL 2
ADDITIONAL 3
FORMULA
36
GO TO
OVERHEAD
NOTES