Direct Labor does not include:

·         Personnel who do not work directly on product but are involved in the manufacturing process.  Examples include supervisors, custodians, security guards etc.

·         Overtime premiums paid to direct labor employees

·         Idle time when the direct employee is not working on the product (equipment breakdowns, new setups, cleanup time etc.)

in manufacturing overhead as indirect labor

.....other costs to operate the factory

• Indirect Materials
• Indirect Labor
• Depreciation/Rent on plant or machinery
• Utilities
• Insurance 
• Property Tax
  

  = Total Manufacturing Costs

     Direct Materials

  + Direct Labor

  + Manufacturing Overhead

  = Total Manufacturing Costs

Beg. Raw Materials

          + Purchases

          – Raw Materials Used

 Ending Raw Materials

Information for Comet Computer Corporation is as follows:

Raw Materials - January 1, 2006:             $6,000

Raw Materials - December 31, 2006:     $5,020

If the company used $134,980 of raw materials during the year how much did the company purchase

Raw Materials Used = Beg. Raw Materials + Purchases – Ending Raw Materials

$134,980 = $6,000 + Purchases - $5,020

$134,980 - $6,000 + $5,020 = Purchases

$134,000 = Purchases

 The cost of the goods completed during the period and transferred to finished goods inventory

Partially complete products (material to which some labor and/or overhead has been added).

Beg. WIP   

            +Total Mfg Costs  

            -Cost of Goods Manufactured  

                                                  = Ending WIP

Raw Material Used

+Direct Labor

+Mfg. Overhead

Total Mfg. Costs

Beg. Fin Goods

            + Cost of Goods Manufactured

            – Cost of Goods Sold

            End Fin Goods

What would be included in Manufacturing Overhead:

• Factory Utilities
• Wages of Assembly-line Personel
• Customer Entertainment
• Indirect Materials Used
• Depreciation on Salespersons' cars
• Production Equiptment rental costs

• Factory Utilities
• Wages of Assembly-line Personel
• Customer Entertainment
• Indirect Materials Used
• Depreciation on Salespersons' cars
• Production Equiptment rental costs

a.   –Fixed costs that are controlled by the segment manager 

à Reflected in the Controllable Segment Margin.

Example:

1.            The Advertising campaign – “Buy a Buick.”

2.   Fixed General and Administrative expense (Office workers, supplies etc.)

b.   - Fixed costs traceable to the segment, but controllable by others

à   Reflected in the Traceable Segment margin.  (Reflects all traceable costs, whether controllable or not).

Example:

1.   Salary of Buick Division president (A manager typically does not set his own salary.

2.   Property Taxes (typically set by the state or local government)

 evaluate the segment manager because some costs that are traceable to a       segment may be completely beyond the influence of the segment manager.

1.    Costs of the corporate headquarters.

2.    CEO of the corporation

3.    Investor relations

4.    Corporate wide advertising

“Buy a GM car.” vs. “Buy a Buick”                                                                                                                                                                                                      

***Important Note: Fixed costs which are traceable on one segmented report may become common if the company is divided into smaller segments.**** x

Traceable Fixed Costs become Common Fixed Costs as you divide into smaller and smaller segments. x

REITs are required to pay out no more than 75 percent of their earnings as dividends. 

T/F   x

False

Distribution to shareholders must equal or exceed the sum of 90% of REIT taxable income

Real estate assets, cash, and government securities must represent at least 95% of REIT

assets.

T/F   x

False

Real estate assets, cash, and government securities must represent at least 75% of REIT

assets.