Question

Which of the following is an example of direct materials cost for an automobile manufacturer?

a) Cost of oil lubricants for factory machinery

b) Cost of wages of assembly worker

c) Salary of production supervisor

d) Cost of interior upholstery

Choose one answer

Answer 1

Answer; Option d) Cost of interior upholstery

Meaning of Direct material cost:

Direct material cost is a cost which is directly incurred on product. (in this case automobile is product) & it is directly associated with the product. It can be directly and easily traceable.

Cost of interior upholstery :

Cost of interior upholstery is cost of seats which are directly incurred on product and can easily identifiable and traceable. It is directly associated with the product. Thus, It is a Direct material cost.

Cost of oil lubricants for factory machinery:

Cost of oil lubricants for factory machinery is not directly associated with product and it is cost of manufacturing overhead and not a Direct material cost.

Cost of wages of assembly worker :

Cost of wages of assembly worker is Direct labor cost.

Salary of production supervisor

Salary to supervisor considered as factory overhead cost. As cost is not directly attributable to product thus it is not a Direct material cost.

Thus, Cost of interior upholstery is a example of direct materials cost for an automobile manufacturer [Answer option d) Cost of interior upholstery]