FA – May 2014 – L1 – SA – Q15 – Cost Classification

This question tests knowledge of classifying costs in a manufacturing context.

Question

For your organisation which is engaged in the production of industrial blocks, bricks and construction, where would you classify the remuneration of a forklift truck operator and the cost of steel girders?

Answer

Direct cost

Explanation: In a manufacturing context, the remuneration of a forklift truck operator directly involved in production activities and the cost of steel girders used in the products would typically be classified as direct costs. The forklift operator’s wages are a direct labor cost, while the steel girders are direct materials. Both can be directly traced to the production of specific products.

Tags: Direct Costs, Indirect Costs, Manufacturing
Level: Level 1

Topic: Cost Classifications
Series: MAY 2014

Uploader: Theophilus