Skip to content

CMA Foundation · Fundamentals of Financial and Cost Accounting · Classification of Costs (CAS 1)

Under the classification of costs by nature or element, which of the following is treated as a direct material cost for a furniture manufacturer, Sharma Woodworks, producing wooden tables?

Timber that becomes part of each table is direct material, because it forms part of the finished product and can be traced to it. Lubricating oil, cleaning cloth and a supervisor's salary support production generally and cannot be traced to individual tables, so they are indirect costs.

  1. ATimber that becomes part of each tableCorrect
  2. BLubricating oil used for the cutting machines
  3. CCleaning cloth used in the factory
  4. DSalary of the stores supervisor

Explanation

Direct material is material that becomes part of the finished product and can be traced to it economically. Timber forms part of each table, so it is direct. Lubricating oil, cleaning cloth and the stores supervisor's salary are indirect costs, as they are not traceable to a specific table.

Did you get it right without looking?

One question tells you little. A timed set on Classification of Costs (CAS 1) shows your real accuracy, how long you take and where you lose marks.

Practise Classification of Costs (CAS 1)Free diagnostic mock

More Classification of Costs (CAS 1) questions