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BUS 630 Week 2 Assignment CASE 3A AUERBACH ENTERPRISES

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BUS 630 Week 2 DQ 1
Direct material direct labor and
manufacturing overhead
On financial statements, each product must include the
costs of the following:
1. Direct material
2. Direct labor
3. Manufacturing (or factory) overhead
Manufacturing overhead (also known as factory
overhead, factory burden, production overhead) involves
a company’s factory operations. It includes the costs
incurred in the factory other than the costs of direct
materials and direct labor. This is the reason that
manufacturing overhead is often classified as an indirect
product cost.
Generally accepted accounting principles require that
cost of direct material cost, direct labor, and
manufacturing overhead be considered as the cost of
products for valuing inventory and for determining the
cost of goods sold. (Expenses that are outside of the
factory, such as selling, general and administrative
expenses, are not product costs and are not
inventoriable. They are reported as expenses on the
income statement in the accounting period in which they

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