ECONOMICS

Detailed explanation-1: -The direct material cost is one of the few variable costs involved in the production process; as such, it is used in the derivation of throughput from production processes. Throughput is sales minus all totally variable expenses.

Detailed explanation-2: -Direct material costs are the costs of raw materials or parts that go directly into producing products. For example, if Company A is a toy manufacturer, an example of a direct material cost would be the plastic used to make the toys.

Detailed explanation-3: -The statement is FALSE. The cost of direct material is an example of a variable cost. Recall that a fixed cost is a cost that stays the same in total and therefore decreases on a per-unit basis when the activity level increases.

Detailed explanation-4: -Variable costs include direct labor, direct materials, and variable overhead.

Detailed explanation-5: -The raw materials used to make the product would also be variable costs since the cost of materials would rise and fall depending on sales volume of the product. The raw materials would also be a variable cost.