ACCA Applied Knowledge · Management Accounting · Accounting for management
A company manufactures chairs. Which of the following is a direct cost of producing a chair?
Timber used in the chair frame is a direct cost because it can be identified with and traced to each chair produced. The other items are indirect overheads shared across many units, so they cannot be attributed to a single chair.
- ASalary of the factory supervisor
- BDepreciation of the factory building
- CTimber used in the chair frameCorrect
- DRent of the head office
Explanation
A direct cost can be traced to a specific cost unit. Timber used in the frame is identifiable with each chair. The supervisor's salary, factory depreciation and head office rent are indirect costs (overheads) shared across many units.
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