Lubricating oil and spare parts of machines are example of?

A. indirect expense
B. direct expense
C. indirect material
D. direct material

Correct Answer:

Option B – direct expense

Explanation

To answer this question, we need to understand what the underlisted terms mean separately.

Direct materials are those materials and supplies that are consumed during the manufacture of a product, and which are directly identified with that product. Items designated as direct materials are usually listed in the bill of materials file for a product. For example, when a car is being assembled from the manufacturing company, every material used up in assembling that car until it gets to the consumer, is referred to as direct material.

Direct expense is an expense incurred that varies directly with changes in the volume of a cost object. A cost object is any item for which you are measuring expenses, such as products, product lines, services, sales regions, employees, and customers. ie, Direct expenses are costs that can be traced back to a specific department, often called an object, and are incurred only to benefit that department. Expenses connected with purchases of goods are known as direct expenses. that is to say, after the purchase of machinery by a firm, the servicing and repairs of that machinery is an expense incurred directly on the machine.