Question

BZoom sells toy bricks that can be used to construct various objects. It purchases a red dye powder to include in the resin used to make the bricks. In this context, what type of cost would the red dye powder be considered?

Answer 1

The red dye powder that BZoom uses in the resin for making toy bricks is a direct material cost, integral to the production process and varying with the quantity produced.

Step-by-step explanation:

In the context of BZoom, a company that sells toy bricks, the red dye powder used to color the resin for the bricks would be considered a direct material cost.

Direct material costs are the expenses for materials that are directly used in the production of a product. Since the red dye is an integral part of the toy bricks, it is directly traceable to the product and is a variable cost, meaning it will vary depending on the quantity of toy bricks produced.

These costs are vital for businesses to track as they directly affect the cost of goods sold (COGS) and overall profitability. For BZoom, effective management of the red dye powder cost would be key to maintaining profit margins while producing high-quality toy bricks.