A company manufactures furniture.Which of the following costs would be included in the production of a piece of furniture as a direct cost,and used to calculate the cost per unit,when making tables?
(i) The wood used to make the table tops
(ii)The varnish and paint used
(iii)The wages of the workers on the assembly line,paid per table manufactured.
(iv)The salary of the supervisor of the assembly line
(v) The salary of the accountant producing the annual accounts for the company.
A) (i) and (ii) only as these are used in the product
B) (i) - (iv) as these are part of production. The accountant is not
C) (i) and (iii) only. The others are indirect costs
D) All of them. The company cannot exist without all of these costs and more

Question

Quizplus · Accepted Answer

"Direct costs" should be attributable exactly to one unit. The wood can be cut to size exactly, but the varnish and paint will differ from piece to piece and therefore is not usually considered a direct cost.Wages of assembly line workers are direct, especially if they are paid piecemeal. But although without a supervisor they might not be productive, the supervisor cost is not a part of the finished product.The accountant costs are not part of production. They are an overhead.Cost accounting is at times much more of an art than a science, and organisations may choose to treat certain overheads as being direct; and vice versa.

A Company Manufactures Furniture