Which cost is normally classified as a direct cost of a particular product?
Correct answer: C. Wood used in making a specific table
- A. Factory rent for the production building
- B. Salary of the production supervisor
- C. Wood used in making a specific table
- D. Electricity used by the entire factory
Explanation
Wood can be traced directly and economically to the table being produced, so it is a direct material cost. Factory rent, supervisory salary and general electricity are normally treated as indirect overheads.
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About Cost Accounting
Cost accounting measures and analyses the cost of producing goods or providing services for planning, control and pricing decisions. It covers direct and indirect costs, fixed and variable costs, job and process costing, break-even analysis, marginal costing, overhead allocation, and the difference between product cost and period cost.
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