Mr. Profit is the owner of a metal fabrication company. They order bulk metal, fabricate and construct metal rails for steps and safety applications.

Mr. Profit has just returned from a meeting with his banker, Mr. Money. He was denied a loan to purchase new fabrication equipment for the business.

Required:

As the new managerial accountant, Mr. Profit does not understand the differences between Direct Materials and Manufacturing Overhead.

Explain these to Mr. Profit.

You are to write a word memo to explain the differences.

What types of Direct Materials would be used in this business and give examples.

What are examples of the Manufacturing Overhead for this business and give examples.

Give 2-3 aspects of Job Order Costing reports that would be useful for the business.