Gallifrey Components Limited produces a stylish reclining chair.Which one of the following is not an indirect production cost?
A)Cost of repairing leather cutting machine.
B)Insurance premium for factory building.
C)Costs of cleaning the factory
D)Royalty of £5.00 per chair payable to the designer.

Question

Quizplus · Accepted Answer

Royalty payment of £5.00 per chair payable to the designer is a direct production cost as it directly relates to the manufacturing of the product. Indirect production costs are expenses that are not directly related to the production of the product, such as repairing equipment (A), insurance premiums for factory building (B), and cleaning the factory (C).

Gallifrey Components Limited Produces a Stylish Reclining Chair