Total Manufacturing Costs — Practice Questions

By Kenneth Boyd, Kate Mooney

Manufacturing costs are directly associated with production; they include direct materials, direct labor, variable overhead, and fixed overhead. A manufacturer will use this information to determine the cost of their product.

In the following practice questions, you are asked to weed out the non-manufacturing costs and then calculate the total manufacturing costs for two different companies.

Practice questions

  1. Red Cow Sleeping Drinks has the following costs:

    • Direct materials: $3,507,000

    • Direct labor: $1,200,000

    • Variable overhead: $700,000

    • Fixed overhead: $250,000

    • Selling expenses: $890,000

    • General expenses: $400,500

    • Administrative expenses: $500,000

    Calculate the total manufacturing costs.

  2. Herb’s Herbs packages high-quality dried herbs for home use. The following costs are taken from Herb’s accounting records:

    • Fresh herbs: $137,000

    • Depreciation on the drying machine: $8,100

    • Glass jars for packaging the herbs: $5,000

    • Electricity to run the drying machines: $15,000

    • Gasoline for delivery trucks: $24,000

    • Internet advertising: $3,000

    • Depreciation on the computer used to do the accounting for the company: $1,000

    Calculate the total manufacturing costs.

Answers and explanations

  1. $5,657,000

    The manufacturing costs are the costs directly associated with production: direct materials, direct labor, variable overhead, and fixed overhead.

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  2. $165,100

    The manufacturing costs are the costs directly associated with production—in this case, direct materials, variable overhead, and fixed overhead. The herbs and the glass jars are direct materials. The electricity to run the drying machines is a variable overhead cost. Depreciation on the drying machine is a fixed overhead cost.

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