Lester-Sung,Inc

question 73

Short Answer

Lester-Sung,Inc.is a large general construction firm in the commercial building industry.The following is a list of costs incurred by this company:
1)The cost of a laborer for 8 hours at $6.00 an hour.
2)The cost of insurance for the carpenters.
3)The cost of 1,000 board feet of 2x4 lumber.
4)The CEO's salary.
Required: Classify each cost above using the following categories:
(a)Selling and administrative cost
(b)Direct material
(c)Direct labor
(d)Overhead cost

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Definitions:

Economically Efficient

Refers to a situation where resources are allocated in a way that maximizes the net benefit to society.

Revenue

The income generated from normal business operations and includes discounts and deductions for returned merchandise.

Consumer Sovereignty

The principle that the consumer's preferences determine the production of goods and services within an economy.

Market System

An economic system where decisions regarding investment, production, and distribution are guided by the forces of supply and demand and prices mediate transactions.