Question

Corcetti Company manufactures and sells prewashed denim jeans. Large rolls of denim cloth are purchased and are first washed in a giant washing machine. After the cloth is dried, it is cut up into jean pattern shapes and then sewn together. The completed jeans are sold to various retail chains. Which of the following terms could be used to correctly describe the wages paid to the workers that cut up the cloth into the jean pattern shapes?A) Yes Yes B) Yes NoC) No YesD) No No

Answer 1

Answer:

Yes it is an indirect cost

No it is not a fixed cost

Explanation:

An indirect cost is one that cannot be traced to the product. For example in this instance direct cost will be the cost of the jeans materials. So wages paid to the workers that cut the jeans patterns is an indirect cost in producing jeans.

A fixed cost is one that does not change during the production process. For example rent. The wages paid is not fixed but variable, as labour needed usually varies with business need.