Which line item typically accounts for direct labor costs?

Which line item typically accounts for direct labor costs?

• A. Operating expenses
• B. Cost of goods sold
• C. Selling, general and administrative expenses
• D. Research and development expenses

Answer: (B)

The correct answer is that direct labor costs are typically accounted for in the Cost of Goods Sold (COGS) line item. This is because COGS represents the direct costs attributable to the production of goods sold by a company. This includes not only the costs of raw materials but also the direct labor involved in the manufacturing process. Direct labor refers specifically to the labor costs of those workers who are directly involved in the production of goods. For example, the wages of factory workers assembling products would fall under this category. Thus, when calculating the total costs associated with manufacturing and selling products, direct labor is included in COGS, reflecting its integral role in the cost structure of producing those goods. The other line items mentioned do not typically include direct labor costs in a way that relates to the production of goods. For instance, operating expenses often encompass various administrative and overhead costs, selling, general and administrative expenses pertain to costs not directly linked to production, and research and development expenses focus specifically on costs associated with innovation and product development, rather than costs incurred during actual production.

The correct answer is that direct labor costs are typically accounted for in the Cost of Goods Sold (COGS) line item. This is because COGS represents the direct costs attributable to the production of goods sold by a company. This includes not only the costs of raw materials but also the direct labor involved in the manufacturing process.

Direct labor refers specifically to the labor costs of those workers who are directly involved in the production of goods. For example, the wages of factory workers assembling products would fall under this category. Thus, when calculating the total costs associated with manufacturing and selling products, direct labor is included in COGS, reflecting its integral role in the cost structure of producing those goods.

The other line items mentioned do not typically include direct labor costs in a way that relates to the production of goods. For instance, operating expenses often encompass various administrative and overhead costs, selling, general and administrative expenses pertain to costs not directly linked to production, and research and development expenses focus specifically on costs associated with innovation and product development, rather than costs incurred during actual production.