Which of the following costs would be included as part of direct materials in the production of an automobile?
a. glue for a sticker applied to the automobile
b. steel
c. gasoline used to fuel machines in production
d. none of these


Which of the following companies would be most likely to use a job-order costing system?
a. carpet manufacturer
b. oil refinery
c. furniture manufacturer
d. paper manufacturer



If there are incomplete jobs at the end of the period, the cost sheets for these jobs make up the
subsidiary ledger for which of the following?
a. Finished goods
b. Direct materials
c. Work in progress
d. Supplies



Which of the following firms would most likely employ a job order costing system?
a. auto manufacturer
b. furniture manufacturer
c. auto dealer
d. CPA firm

A competitive advantage has been established when
a. customers see the variation as important and the value added to the customer exceeds the cost of providing differentiation.
b. a high-cost strategy increases customer value by minimizing customer sacrifices.
c. a low-profit item is dropped from the product line.
d. both a and b.



I think the answers are
a
c
c
b
d

But I am not sure if my answers are right or not? Can someone help me with that?

The first one is incorrect. Direct materials are those things which can be easily traced directly to the product (or service). You can't really take that too literally. I tend to think of it as the "main" things going into a product. The word "easily" is important here - that is, it's easy to know what went to each product AND it's not a waste of money to try to figure it out. For instance, I might know there are exactly four screws on each widget I make, but it's not cost effective to bother applying the cost of four screws to each widget. So I'm going to call it indirect instead.

As a general rule, hardware, paint, oil and such like that are going to be indirect costs, partly because it can be difficult to trace them directly and/or because it's not worth the effort to do so.

Given that, which one seems a better choice to you?