Materials that are crucial parts of a finished product are called:

• A. Factory overhead
• B. Direct materials
• C. Work in process
• D. Indirect materials

Answer: (B)

Verified step by step guidance

1. Understand the concept of direct materials: Direct materials are raw materials that can be directly traced to the production of a specific finished product. These materials are integral to the final product and are easily identifiable in the manufacturing process.
2. Differentiate between direct and indirect materials: Indirect materials are materials used in the production process but cannot be directly traced to a specific product. Examples include lubricants or cleaning supplies used in the factory.
3. Clarify the term 'factory overhead': Factory overhead refers to all indirect costs associated with manufacturing, such as utilities, depreciation, and indirect materials. It does not include direct materials.
4. Explain 'work in process': Work in process refers to partially completed goods that are still in the production process. It includes direct materials, direct labor, and factory overhead costs incurred up to that point.
5. Conclude that materials crucial to a finished product are classified as direct materials, as they are directly traceable and essential to the final product.