Problem 2 (10 points: 5 points each question) A. Describe the main difference between direct materials and indirect materials that are used in any given production process. (5 points) Solution The main difference is measurability. For most products, measuring materials used is important because it can be translated into a per unit measurement. This assists management in keeping track of the main amount of materials that are used in manufacturing the products themselves. Should any discrepancies occur in these measurements, management can take action to correct problems. Indirect materials are generally those items that are used in the process but cannot be easily assigned to each unit manufactured. Such items are adhesives, screws, washers and some covering materials such as paint. Management finds it more efficient to monitor such items on a volume rather than a per unit basis. B. The following categories are used by manufacturing companies for costs: DM DL MO - Direct Materials - Direct Labour - Manufacturing Overhead Presented below is a list of costs and expenses incurred in the factory by Bates Corporation, a manufacturer of recreational vehicles. 2. b. c. Property taxes on the factory land Rubber used in manufacturing Welder's wages Sandpaper used in production Factory supervisors' salaries Depreciation on factory machines Factory electric Carpeting for the recreational vehicles Tissue paper for the factory workers' . h. i. washrooms j. Insurance on factory equipment Instructions Select the category to which each cost or expense belongs and write the abbreviation of the cost in the space provided. (5 points; point each)