Which item is usually classified as an indirect material cost in a furniture factory?
Correct answer: B. Varnish used across many products
- A. Wood used in a specific table
- B. Varnish used across many products
- C. Wages paid to a cabinet maker
- D. Commission paid to a sales agent
Explanation
Varnish used across several products cannot usually be traced economically to one unit, so it is treated as indirect material. Wood used for a particular table is a direct material cost.
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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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