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Cost Classification by function-Example

Cost Classification by function-Example

Manufacturing Company has the following costs:

– Cost of direct materials………….. ……$200,000
– Direct labor…………………………………$500,000
– Factory overhead………………………….$100,000
– Office rental…………………………………$20,000
– Office salaries……………………………….$90,000
– Depreciation of office equipment……$9,000
– TV advertisement………………………….$10,000
– Interest expense…………………………….$5,000
– Delivery cost to customers………………$6,000

Required:

You are required to classify above costs by function.

Solution:

Types Of Cost Costs Explanation
Manufacturing costs 800,000 200,000+500,000+100,000
Marketing costs 10,000
Distribution Cost 6,000
Administrative  costs 119,000 20,000+90,000+9,000
Financing costs 5,000

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