Living in Nature manufactures wooden furniture (such as chairs, desks and coffeeables) in a factory. lf the cost obiect is the factory, what costs would beconsidered direct? a.Salary of the worker who glues the legs to the chair seat b.Salary of the manufacturing supervisor c. Insurance on the factory d. Rent on the factory e. All of the above
Question
Living in Nature manufactures wooden furniture (such as chairs, desks and coffeeables) in a factory. lf the cost obiect is the factory, what costs would beconsidered direct?
a.Salary of the worker who glues the legs to the chair seat b.Salary of the manufacturing supervisor c. Insurance on the factory d. Rent on the factory e. All of the above
Solution
If the cost object is the factory, then the direct costs would be those that can be directly traced to the operation of the factory.
In this case, the direct costs would be:
b. Salary of the manufacturing supervisor: This is a direct cost because the supervisor's work is directly related to the operation of the factory.
c. Insurance on the factory: This is a direct cost because it is a cost directly associated with the factory.
d. Rent on the factory: This is a direct cost because it is a cost directly associated with the factory.
The salary of the worker who glues the legs to the chair seat (option a) would be a direct cost if the cost object was the chair, but not if the cost object is the factory.
Therefore, the correct answer is b, c, and d.
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