1.

In what way does a typical manufacturing business differ from a merchandising

concern?
 A manufacturing business makes the products while a merchandising business
sells the products they purchase from a manufacturer. They are both similar in
selling the products as they sell it for more than it cost them to buy or produce.
2. What are the elements of production costs, explain each element?
 The elements of production costs are: direct materials, direct labor, and
manufacturing overhead. Direct materials are materials that can be readily
identified on product that has been manufactured. Direct labor on the
other hand is the labor of employees who work directly on the product
manufactured. Manufacturing overhead includes all related to production
other than direct materials and direct labor.
3. Define the following costs: direct materials, indirect materials, direct labor,
indirect labor, and manufacturing overhead.
 Direct materials are materials that can be readily identified on product
that has been manufactured. Indirect materials are materials that are used
in the production process but are not traceable or readily identified to the
product. Direct labor is the labor of employees who work directly on the
product manufactured. Indirect labor is the labor of employees who are
not directly involved in the production of the products. Manufacturing
overhead includes all related to production other than direct materials and
direct labor.
4. Define prime cost and conversion.
 Prime costs are the costs directly incurred to create a product, it is only
related to direct materials and direct labor. Conversion costs are
production costs required to convert raw materials into completed
products, it includes direct labor costs and factory overhead costs.
5. Consider education as a product. What are the direct and indirect costs to a
university in educating a student?
 The direct costs to a university in educating a student are tuition fees of
the students, salaries of the teaching staff, cost of building, cost of
furniture. The indirect costs to a university in educating a student are
electricity, books, supplies, and transportation.