Which of the following is NOT an example of tangible costs?

• A. Depreciation expense on machinery
• B. Wages paid to factory workers
• C. Raw material purchases
• D. Lost customer goodwill

Answer: (D)

Verified step by step guidance

1. Step 1: Understand the concept of tangible costs. Tangible costs are expenses that can be directly measured and quantified in monetary terms. These costs are typically associated with physical items or services.
2. Step 2: Analyze each option provided in the question. For example, depreciation expense on machinery is a tangible cost because it represents the allocation of the cost of a physical asset over its useful life.
3. Step 3: Evaluate wages paid to factory workers. These are tangible costs because they are direct payments made to employees for their labor, which can be quantified in monetary terms.
4. Step 4: Consider raw material purchases. These are tangible costs because they involve the acquisition of physical goods that are used in production, and their cost can be measured directly.
5. Step 5: Examine the option 'Lost customer goodwill.' This is NOT a tangible cost because it represents an intangible concept. Customer goodwill refers to the reputation and relationships a company has with its customers, which cannot be directly measured or quantified in monetary terms.