Archambeau Products Company manufactures office furniture. Recently, the company decided to develop a formal cost accounting system and classify all costs into three categories. Categorize each of the following items as being appropriate for (1) cost tracing to the finished furniture, (2) cost allocation of an indirect manufacturing cost to the finished furniture, or (3) as a nonmanufacturing item.
-Lathe maintenance

Question

Quizplus · Accepted Answer

Lathe maintenance is an indirect manufacturing cost because it is necessary for the production process but cannot be directly traced to the production of a specific piece of furniture. Therefore, it should be allocated to the cost of the finished furniture.

Archambeau Products Company Manufactures Office Furniture