Which expense type would typically be categorized as a direct cost?

The wages of factory workers assembling a product are categorized as a direct cost because these expenses can be directly traced to the production of specific goods. Direct costs are those that can be attributed directly to the production process or the delivery of a service, making them essential for determining the cost of goods sold and for pricing decisions. In this case, the labor costs of workers who assemble a product are variable costs that change in direct proportion to the amount of production, thus aligning with the definition of direct costs.

In contrast, advertising expenses, insurance costs for factory machinery, and office supplies for administrative work are typically considered indirect costs. Advertising expenses do not directly contribute to the manufacturing of a specific product but rather support overall business marketing efforts. Insurance costs for machinery protect assets but are not directly tied to a specific product. Similarly, office supplies are associated with general administrative functions and, while necessary, do not directly impact production costs. These examples highlight the clear distinction between direct and indirect costs in managerial accounting.