Question

Diez Company produces sporting equipment, including leather footballs. Identify each of the following costs as direct (D) or indirect (I). The cost object is a football produced by Diez.

1. Electricity used in the production plant
2. Labor used on the football production line
3. Salary of manager who supervises the entire plant
4. Depreciation on equipment used to produce footballs
5. Leather used to produce footballs

Short answer

S.no.	Particular	Cost
1	Electricity used in the production plant	Indirect cost
2	Labor used on the football production line	Direct cost
3	Salary of a manager who supervises the entire plant	Indirect cost
4	Depreciation on equipment used to produce footballs	Indirect cost
5	Leather used to produce footballs	Direct cost

Step-by-step solution

Meaning of Direct Cost

Direct cost is remuneration paid for the work done by employees to convert unprocessed materials into finished goods. They have a direct role in the creation of the goods that we use.

Identifying each of the cost

S.no.	Particular	Cost	Explanation
1	Electricity used in the production plant	Indirect cost	Electricity is necessary for the production equipment to run. Since it can't be connected to a specific machine or commodity, the cost of power is indirect. However, the price of electricity is a variable cost because it is used more frequently as more goods are created or manufactured.
2	Labor used on the football production line	Direct cost	The labor used on a football production line is treated as a direct cost of the product because the company's products are the result of the labor of its employees. They have a direct role in the making of the items we use.
3	Salary of a manager who supervises the entire plant	Indirect cost	The remuneration of a plant manager is a. an indirect expense. The compensation of the plant manager is an indirect cost incurred during the manufacturing process and has no direct bearing on the products made.
4	Depreciation on equipment used to produce footballs	Indirect cost	It is regarded as an indirect cost in the production division of a manufacturing organization since it is added to factory overhead and then assigned to the units produced throughout a reporting period. A firm's most typical handling of depreciation is as an indirect cost.
5	Leather used to produce footballs.	Direct cost	A direct cost is an expense incurred directly by a business to make a product or service or to acquire a wholesale product for resale. Football leather is the primary material for making footballs, so it is included in the direct cost.