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Phil enters into a contract to hire Bob's Building Business to build a warehouse for Phil.The contract specifies that the warehouse should be built with HighQual Bricks.When construction starts,HighQual Bricks cannot provide enough bricks for the warehouse.Bob's Building Business substitutes Big Red Bricks,which are comparable in quality and price to HighQual Bricks.This deviation from the contract
Overhead Costs
Expenses associated with the day-to-day running of a business that are not directly linked to the production or selling of goods and services.
Direct Materials
Raw materials that are directly traceable to the manufacturing of a product and considered a part of the product’s cost.
Direct Labor
The labor costs directly associated with the production of goods, including wages for workers who are involved in the actual manufacturing process.
Allocation Base
A measure or statistic used to distribute indirect costs to different cost objects, such as departments or products.
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