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direct cost

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA MA – FIA FMA › direct cost

  • This topic has 1 reply, 2 voices, and was last updated 6 years ago by John Moffat.
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  • November 16, 2016 at 5:02 pm #349211
    ryan32
    Member
    • Topics: 35
    • Replies: 64
    • ☆☆

    direct cost can be linked directly to a cost unit.

    say
    a table requires 4 kg of wood to produce and cost of 1 kg of wood cost $5
    so the cost of producing 1 table in terms of material should be (4×5)= $20

    in case the store inventory consist of 2 kg wood at a rate of $5/kg
    and 2 kg wood at a rate of $6/kg

    in that case will the table cost in terms of material should be like (2×5)+(2×6)=10+12=$22

    or it will be assumed that material cost per table is constant at $20

    November 16, 2016 at 5:37 pm #349317
    John Moffat
    Keymaster
    • Topics: 56
    • Replies: 51888
    • ☆☆☆☆☆

    It depends on the wording of the question.

    Usually we use the standard cost (of $5 per kg) throughout, but again it depends on what the question says and what it asks for.

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