ACCA Applied Knowledge · Management Accounting · Cost classification
A furniture maker buys timber that becomes part of the tables it produces. Which classification of cost element best describes the timber?
The timber is direct material, because it becomes part of the finished tables and its cost can be traced to the units produced. Indirect materials are minor or general supplies that cannot be economically traced to individual products.
- ADirect materialCorrect
- BIndirect material
- CDirect expense
- DProduction overhead
Explanation
Timber is physically incorporated in the product and can be traced to each table, so it is direct material. Indirect material would be consumables such as glue or cleaning supplies that cannot be economically traced to units.
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