Direct factory costs are traceable to specific production units

Steps:

• Define direct factory costs as expenses directly attributable to manufacturing specific products, like materials, labor, or per-unit fees.
• Review each option against this definition: direct if traceable per unit, indirect if factory-wide.
• Eliminate indirect costs (overheads) that support production but aren't unit-specific.
• Identify the option that fits direct attribution, such as production-based royalties.

Why D is correct:

• Manufacturing royalties are direct factory costs per accounting standards (e.g., IAS 2), as they are variable expenses tied directly to units produced under licensing agreements.

Why the others are wrong:

• A: Carriage outwards is a selling/distribution expense, not factory-related.
• B: Depreciation of factory machinery is an indirect overhead, allocated across all production.
• C: Factory supervisors' wages are indirect labor, supporting overall operations rather than specific units.

Final answer: D