CMA Intermediate · Cost Accounting · Material Costs
A Coimbatore pump manufacturer classifies the following. Which item is correctly treated as direct material for the pump product?
The cast iron casting forming part of each pump housing is direct material. Direct material is physically incorporated in the product and can be traced to it economically. Lubricants, cleaning waste and office tape are consumables treated as indirect materials or overheads.
- ALubricating oil used for factory machines
- BCast iron casting that becomes part of each pump housingCorrect
- CCleaning cotton waste used in the workshop
- DPacking tape used for dispatch office stationery
Explanation
Direct material is identifiable with and forms part of the finished product. The casting becomes the pump housing, so it is direct. Lubricating oil, cotton waste and tape are consumables that cannot be traced economically to units and are indirect.
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