Question

Riverland Shoes and Boots Inc. manufactures three styles of steel-toed workboots. They are in the process of classifying their costs into a cost hierarchy to get a better understanding of the cause and effect relationships between the various costs and drivers. They are currently looking at the cost of direct materials to manufacture one style of their boots. What type of cost would this be in their cost hierarchy?

Answer 1

Direct materials would be classified as a variable cost in the cost hierarchy.

Step-by-step explanation:

In the cost hierarchy, direct materials would be classified as a variable cost. Variable costs are costs that change proportionately with the level of production. As the production of one style of workboots increases, the cost of direct materials will also increase. This is because the direct materials, such as leather or steel, are directly used in the manufacturing process of the boots.