Explain When Donated Materials Should Be Recognized as a Contribution

question 65

Essay

Explain when donated materials should be recognized as a contribution and as an expense by a nongovernmental not-for-profit organization.

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Definitions:

Conversion Costs

These are costs incurred during the manufacturing process to convert raw materials into finished products, including direct labor and factory overhead expenses.

Depreciation Expense

The allocation of the cost of a tangible asset over its useful life.

Factory Overhead

Costs associated with operating a factory that are not directly tied to a specific product, including maintenance, utilities, and salaries of supervisors.

Factory

A building or group of buildings where goods are manufactured or assembled primarily by machines.