Question

4. Which of the following would be considered a direct material cost?

A. Rubber used in the manufacture of tires

B. Wages paid to bakers in a bakery.

C. Employee overtime

D. Glue used in the production of sofas.

Answer 1

Answer:

Direct material cost includes those cost which is consumed during the manufacturing of goods & that can be directly attributable to that product. Items which are not directly identifiable with the product should not considered as direct material costs.

Direct labor cost includes the cost incurred for the payment of wages etc. to the labor that can be directly identifiable with the product.

Wages paid to bakers in a bakery & employee overtime is considered as labor cost while glue used in the production of sofas should be considered as manufacturing overhead.

The rubber used in the manufacturing of tires is directly identifiable with the manufacturing of tires & therefore it should be considered as direct material cost.

Therefore, Option (A) i.e. "rubber used in the manufacture of tires" is the correct answer.