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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 maker 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 and cleaning supplies are indirect materials, and a supervisor's wages are indirect labour.

  1. ATimber that becomes part of each table and can be traced to itCorrect
  2. BLubricating oil used for the carpentry machines
  3. CWages of the factory supervisor
  4. DCleaning supplies used in the workshop

Explanation

Direct material is material that becomes an integral part of the finished product and can be economically traced to it. Timber used in tables meets this test. Lubricating oil and cleaning supplies are indirect materials, and supervisor wages are indirect labour.

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