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 |