ACCA Applied Knowledge · Business and Technology · Financial information provided by business
Which of the following is a direct cost of producing a batch of wooden tables?
Wood used to make the tables is the direct cost because it can be traced specifically to the product. Factory building depreciation, the factory manager's salary and lighting electricity support production generally and are indirect overheads rather than traceable costs.
- AWood used to make the tablesCorrect
- BDepreciation of the factory building
- CSalary of the factory manager
- DFactory electricity for lighting
Explanation
A direct cost can be traced economically to a specific cost unit. Wood used in the tables is direct material. The other items relate to the factory as a whole and are indirect overheads shared across products.
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