Question

Direct material costs are the acquisition costs of all materials that eventually become part of the cost object and cannot be traced to the cost object in an economically feasible way.

True

False

Answer 1

Direct materials are used for the production of finished goods. Direct Material costs are includes purchasing cost, transportation cost or any other cost which are incurred to bring the material to present location and condition. These direct materials ultimately becomes the part of cost object i.e. product. And these can be traced to the product in an economically feasible way.

For example-: Potato chips are made up of potato. Potatoes used in the production of chips is the direct material for the product. When we see chips, we can easily traced Potatoes in it.

On the basis of above analysis, we can conclude the statement given above is FALSE. And it can be traced in an economic feasible way.