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CMA Intermediate · Cost Accounting · Direct Expenses

In a cost sheet prepared under CAS 10 (Direct Expenses), which of the following items would be treated as a direct expense of a specific job?

Hire charges of a special mould used exclusively for Job J-17 are a direct expense, because the cost is incurred for that one job and can be traced to it. Factory manager salary, building depreciation and plant electricity benefit many jobs, so they are overheads.

  1. AHire charges of a special mould used exclusively for Job J-17Correct
  2. BSalary of the factory manager
  3. CDepreciation on the general factory building
  4. DElectricity charges for the whole plant

Explanation

A direct expense is incurred specifically for a cost object and can be traced to it economically. Hire of a mould used only for Job J-17 is traceable to that job. The manager's salary, building depreciation and plant-wide electricity serve many jobs and are overheads.

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