ACCA Applied Knowledge · Management Accounting · Cost classification
Which of the following is a direct expense rather than an indirect cost of a product?
Hire of a specialist machine used solely for one customer's job is a direct expense because it can be traced directly to that cost unit. Building depreciation, premises insurance and the production manager's salary benefit all production and are indirect overheads.
- AHire of a specialist machine solely for one customer's jobCorrect
- BDepreciation of the factory building
- CInsurance of the factory premises
- DSalary of the production manager
Explanation
A direct expense is a cost other than materials or labour that can be traced to a specific cost unit. Hire of a machine used only for one job is traceable to that job. The other three are general factory overheads shared across all production.
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