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ACCA Applied Knowledge · Management Accounting · Accounting for material, labour and overheads

Which of the following is an indirect labour cost in a manufacturing company?

The factory supervisor's salary is indirect labour. A supervisor oversees several production lines and cannot be economically traced to a specific product, so the cost is production overhead. Operators, assembly workers and craftsmen working on identifiable output are direct labour.

  1. AWages of a machine operator making products to customer order
  2. BWages of an assembly worker on a specific batch
  3. CSalary of a factory supervisor overseeing several production linesCorrect
  4. DWages of a craftsman making a specially commissioned item

Explanation

Indirect labour cannot be traced to a specific product or job and is treated as production overhead. A supervisor oversees several lines, so the salary is indirect. The other roles work directly on identifiable output and are direct labour.

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