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What cost category would be the largest dollar amount at the end of the year for...

What cost category would be the largest dollar amount at the end of the year for manufacturing #2 pencils? Direct Labor, Direct Materials, or Manufacturing Overhead. Why?

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Answer #1

The cost category of the direct material will be the highest in the manufacturing of pencil because the biggest component to be used in the manufacturing of pencil will be the material used in making the pencil apart from this direct labour and manufacturing overhead will be incurred at a low amount as compared to direct material.  

Basically in manufacturing of any product the component will comprise of direct material as the cost of raw material has the highest proportion in making of the product. Direct labour used to manufacture the product will be incurred but the amount will be in the proportion will be lower because of specialisation and different machinery used in it. Also manufacturing overhead other other indirect cost which will be in much lower proportion as they are in direct in nature towards the product.

Therefore the correct option is Direct material.

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