Direct Labor,direct Materials,and Manufacturing Overhead Are All Product Costs

question 22

Essay

Direct labor,direct materials,and manufacturing overhead are all product costs.Why is overhead more difficult to account for than either direct labor or direct materials?

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Definitions:

Depreciable Asset

An asset that loses value over time due to wear and tear, obsolescence, or age, and for which depreciation can be applied.

Recoverable Amount

The higher of an asset’s fair value less costs of disposal and its value in use.

Cash-Generating Unit

The minimal identifiable collection of assets that produces cash flows mostly independent from those generated by other assets or collections of assets.

Impairment Loss

A decrease in the recoverable value of an asset below its carrying amount, prompting a write-down of the asset's value on the financial statements.