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

Instructions for Memo:

Write a 250- 300 word memo about the following situation.
Memo- 2

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?

What are examples of the Manufacturing Overhead for this business?
2. Give 2-3 examples of reporting and how it could be useful to approach the banker to get the loan approved?