Final answer:
Janitorial wages in Bubba's factory are categorized as Factory overhead. This cost is part of the indirect costs of maintaining the production environment, not directly associated with manufacturing the product. Changes in wages can affect the firm's balance between labor and physical capital equipment.
Step-by-step explanation:
The cost of wages paid to the janitors in Bubba's factory is considered Factory overhead. This classification is because the janitors do not work directly on the product itself but provide a service that maintains the production environment, making them an indirect cost. Direct labor would be associated with workers who are actively involved in the creation of the product. Indirect materials are items that support the production process but are not part of the final product. General and administrative costs are expenses related to overall company operations outside of manufacturing.
For every input like labor, there's an associated factor payment such as wages or salaries. The cost of production is calculated as the sum of each input multiplied by its associated factor payment. Changes in wages can influence how a firm chooses to balance labor and physical capital equipment, potentially increasing labor productivity but reducing the total number of workers needed.