Which of the following costs can be directly linked to specific products in a company's inventory records?

• A. Factory rent expense
• B. Administrative salaries
• C. Direct materials cost
• D. Depreciation on office equipment

Answer: (C)

Verified step by step guidance

1. Understand the concept of direct costs: Direct costs are expenses that can be directly traced to the production of specific goods or services. These costs are easily identifiable and measurable for each product.
2. Review the options provided: Factory rent expense, administrative salaries, direct materials cost, and depreciation on office equipment. Determine which of these can be directly linked to specific products.
3. Analyze each option: Factory rent expense and depreciation on office equipment are considered indirect costs because they support the overall production process but cannot be traced to individual products. Administrative salaries are also indirect costs as they relate to general business operations rather than specific products.
4. Focus on direct materials cost: Direct materials are raw materials that are used specifically in the production of a product and can be directly traced to that product. For example, wood used to manufacture furniture or fabric used to produce clothing.
5. Conclude that direct materials cost is the correct answer: It is the only cost among the options provided that can be directly linked to specific products in a company's inventory records.