CMA Intermediate · Cost Accounting · Direct Expenses
Under cost accounting, which of the following is treated as a direct expense of a specific job or cost unit?
Royalty paid per unit produced is a direct expense because it is incurred specifically for the product and can be traced to each unit. Factory rent, works manager salary and office depreciation serve the whole business and are treated as overheads.
- ARoyalty paid per unit produced under a licence for manufacturing that productCorrect
- BFactory rent for the whole plant
- CSalary of the works manager
- DDepreciation of the administrative office building
Explanation
A direct expense is one incurred specifically for a cost object and traceable to it other than direct material and direct labour. Royalty paid per unit produced is traceable to the product. Factory rent, works manager salary and office depreciation benefit many units and are overheads.
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