Question

Assume that we tour Apple’s factory where it makes iPhones. List three direct costs and three indirect costs that we are likely to see.

Short answer

Direct cost: Purchasing raw material, Product assembly workers costs, and components such as circuits.

Indirect cost: Depreciation of factory equipment, Taxes, Supervisor’s salary.

Step-by-step solution

Meaning of Direct labor

Employee work to transform raw resources into final commodities is direct labor. In other words, the things a company sells result from the employees’ labor. The products they assist in the making can be directly linked to this work.

Listing three direct costs and three indirect costs

Direct costs include:

• The product assembly worker's costs and
• Component costs such as chips, circuit boards, casings, and drives.
• Cost of purchasing raw material.

Indirect costs include:

• The cost of maintenance workers' compensation.
• Deterioration of factory equipment.
• Lighting and warming costs at the facility.
• Supervisors' salaries.
• Insurance for the facility's structures.
• Property taxes for the facility.