Direct vs Indirect Materials and Labour in Manufacturing

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Which type of materials are used for maintenance and repair of machinery and do not normally form a part of the finished product?

Indirect materials

What can be easily traced to individual units of product and involves workers directly engaged in the production process?

Direct manufacturing labour

Which one of the following examples represents indirect labour in a manufacturing setting?

Wages paid to cleaning staff and general helpers in the factory

Which category includes costs that cannot be economically traced to specific units of production and consist of expenses like factory maintenance staff wages?

Manufacturing overhead

Which term is used to describe the assignment of indirect costs to a cost object?

Cost allocation

What is an example of an indirect cost in the text provided?

Lease cost of a particular plant

How would you categorize the cost of steel and tires in the context of cost allocation?

Direct materials

If there is no separate lease agreement for the space used to make Baleno, how would you classify the lease cost?

Indirect cost of Baleno

Which of the following best describes direct materials?

Materials that can be conveniently traced directly to the product

What is a common cost driver for indirect materials?

Number of purchase orders made

Which of the following is an example of direct manufacturing labor?

Workers assembling the product on the production line

What could be a potential cost driver for manufacturing overhead?

Number of production hours worked

What is the main implication of treating costs as expenses in the period they are incurred?

Increase in inventory value

In which type of firm does the nature of the firm have the greatest impact on determining which costs should be included in product costs?

Manufacturing firm

Which of the following is an example of a relevant cost based on cost classification?

Differential cost

What is the concept of opportunity cost mainly focused on?

Income generated from an alternative choice

Why are shutdown costs considered fixed costs?

Because they are incurred in all situations when production stops

What is the implication of shutdown costs being unavoidable fixed costs?

They do not affect the decision-making process

In the context of joint costs, what is the significance of the split-off point?

It is the stage where different products become identifiable

How do joint costs differ from other types of costs in terms of cost allocation?

They are not allocated until the split-off point

What is the implication of product costs on decision-making, according to the text?

Product costs are irrelevant and should be ignored in decision-making.

How are relevant costs defined in the context of decision-making?

Relevant costs are future costs that are affected by the decision at hand.

What is the primary characteristic of differential costs in decision-making?

Differential costs are those that differ between alternatives being considered.

How should opportunity costs be treated in decision-making, based on the text?

Opportunity costs should always be included as relevant costs in decision-making.

Learn about the distinction between direct and indirect materials in manufacturing. Explore the difference between direct manufacturing labor and indirect manufacturing labor. Understand how these concepts impact costing and production processes.

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