Traceability of Product, Volume of Activity, Expenses on the Basis of Functions

Here are a few expenses, are they direct of indirect (traceability of product)

 

(Any cost up to Prime Cost is direct)

 

Carriage expenses on raw materials – Direct Cost

Advertising expenses – Indirect Cost

Office rent – Indirect cost

 

 

Big Consultancy Firms: BCG, McKenzie, PWC, Ernst and Young, Arthur de Little, Booz Ellen and Hamilton, Accenture

 

 

Packaging expenses – Direct as well indirect. For FMCG companies, goods are such that they cannot be sold without packaging – so they are Primary Packing.

 

 

Primary packing goes in to the making of a product without which the product is unsaleable whereas secondary packing expenses are not as much a necessity, which means products, can still saleable without such a packaging.

 

 

 Workers wages – Direct cost

 

Raw material charges – Direct cost

 

Depreciation on furniture – indirect cost

 

Legal expenses – Indirect cost

 

 

Deprecation in accounts is a non-cash expense.

 

 

Classify expenses on the basis of functions and write which functions will be:

a) Office and admin overheads

b) Selling and distribution expenses

c) Factory expenses

 

-       Legal expenses: office and admin overheads

-       Packaging expenses: selling and distribution

-       Rent of warehouse (finished goods): Selling and distribution

-       Fuel and oil: factory expenses

 

 

Classify the following costs as direct or indirect (traceability of product)

 

-       Office cleaning: Indirect

-       Freight inwards charges: Direct

-       Freight outward charges: Indirect

-       Factory supervision: indirect cost

-       Raw materials imported: indirect costs

 

 

 

 

Classify the expenses on the basis on the volume of activity (Fixed, variable, semi variable)

 

1)    Factory insurance: Fixed cost

2)    Direct Labor: variable costs

3)    Depreciation on office buildings: Fixed costs

4)    Showroom expenses: Fixed costs

 

 

Classify the following items as direct or indirect:

 

1)    Advertisement expenses – indirect

2)    Overtime wages – indirect (when not specified it is always indirect)

3)    Productive wages – direct

4)    Carriage inwards – direct

 

Classify as fixed, variable or semi variable:

 

1)    Managers salary: fixed

2)    Direct labour: variable

3)    Sales traveling expenses: Fixed

4)    Electricity expenses: semi variable

 

Classify the following as factory overheads, office and admin overheads or S & D overheads:

 

1)    Depreciation on delivery van: S & D

2)    Bank charges: office and admin expenses

3)    Counting house wages: office and admin overheads

4)    Drawing office salary: office and admin overheads

 

 

 Lec. 4, Prof. Dhaval, 6/ 12/ 2007