In a service industry,direct materials are usually insignificant in amount and can not easily be traced to a cost object.

Question

Quizplus · Accepted Answer

Direct materials are typically only relevant in manufacturing or production industries where physical materials are directly used in the creation of the final product. In service industries, the focus is on the cost of labor and indirect costs such as rent, utilities, and equipment. Direct materials are usually either non-existent or extremely minimal and cannot be easily traced to a specific cost object.

In a Service Industry,direct Materials Are Usually Insignificant in Amount