Manufacturing costs: direct and indirect costs sheetStructured-answer frameDistinguish direct costs from indirect costs with examples from a manufacturing business.
How to lay out the answer. Follow the frame, then write it in your own words.
- 1 · Define direct costs. Traceable to each unit: materials, labour, expenses.
- 2 · Define indirect costs. Factory costs not traceable to one unit: overheads.
- 3 · Give examples from one factory. Garment factory: fabric and operators' wages vs supervisor's salary, factory power, machine depreciation.
- 4 · Show where they go. Prime cost vs factory overheads in the manufacturing account.
- 5 · Mention period costs. Office and selling costs go to the income statement, not the manufacturing account.
Scoring tip: Use one factory for all your examples; it keeps the answer tidy.
