CA Inter P4 · Chapter 3 · Question 10 of 11
Which of the following is an example of a direct expense?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) Royalty paid to the patent holder on each unit produced
Explanation
Direct expenses are expenses, other than direct material and direct employee cost, that can be identified with a specific cost object in an economically feasible way. Royalty based on units produced is directly traceable to the product. Factory rent and works manager's salary are production overheads, and office depreciation is an administrative overhead.
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