Question

If your cost object is a can of Diet Dr Pepper, which of the following is a direct cost?

A) the cost of one alumnimum can

B) depreciation on factory equipment

C) plant supervisor salary

Answer 1

a) cost of one aluminium can is direct cost

Because cost of can is directly related to to product as well as it's directly used in final product as we know that we've used one can for 1 diet dr pepper can.

Reason why other 2 are not correct

b) Depreciation on factory equipment.

It is related to product so it's a product cost but its indirectly related so it will be included in indirect cost as we don't know how much equipment used for making 1 diet dr pepper can.

C) Plant supervisor salary

It is also product cost but it is indirect cost as supervisor work for whole factory and we don't know and we can't calculate how much he has worked for making 1 diet dr pepper can.