CMA Q:
Many companies recognize three major categories of costs of manufacturing a product. These are direct materials,direct labor, and overhead?

Question

Which of the following is an overhead cost in the production of an automobile?

A. The cost of small tools used in mounting tires on each automobile.

B. The cost of the tires on each automobile.

C. The cost of the laborers who place tires on each automobile.

D. The delivery costs for the tires on each automobile.

Abed Alrazzak Samara · Answer

Hi

Overhead costs are the costs that are not related to Direct Material or Direct Labor costs.

Answer B) Cost of the tires - Direct Material Cost

Answer C) Cost of Laborers - Direct Labor Cost

Answer D) Delivery Costs for Tires - Should be included under the Direct Material Cost in order to insure proper and accurate cost per unit.

Correct Answer is Answer A) The cost of small tools.

Would appreciate the feedback.

Thanks

Abed