If the Cost of a Direct Material Is a Small

question 94

Multiple Choice

If the cost of a direct material is a small portion of total production cost, it may be classified as part of

• A) direct labor cost
• B) selling and administrative costs
• C) miscellaneous costs
• D) factory overhead cost

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Definitions:

Firm Offer

A binding promise made by a seller to hold an offer open for a specified period of time, not requiring consideration to be enforceable under certain conditions in commercial transactions.

Breach of Warranty

Failure to fulfill the terms of a promise or guarantee made about the quality or duration of a product or service.

Installation

The process of setting up or fitting equipment, software, or hardware for it to be ready for use.

Conditional Sales Contracts

Agreements that transfer the possession of goods from the seller to the buyer, but not legal ownership until certain conditions, typically final payment, are met.