ICAEW BIP · Chapter 1 · Question 1 of 10
Oakleaf Ltd manufactures dining tables. Which of the following is a direct cost of a table?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) The hardwood used to make the table top
Explanation
A direct cost can be traced specifically and economically to a single cost unit. The hardwood is identifiable in each table, so it is direct material. Factory rent, the supervisor's salary and machine depreciation are incurred for all output and are therefore indirect production costs (production overheads).
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