BikeFace is a leading manufacturer of bicycles. Which of the following would be considered direct costs for this organisation? Select TWO.

Direct costs are expenses that can be directly traced to the production of a specific product or cost object. In the context of BikeFace, a bicycle manufacturer, rubber is a direct material as it is a primary component of the tires, and its cost can be allocated to each bicycle produced. Labour, referring to the wages of the assembly line workers who physically build the bicycles, is a direct labour cost. The time and cost associated with this labour can be directly attributed to each unit. Both direct materials and direct labour are prime costs in manufacturing.

C. TV advert: This is a selling and marketing expense, which is an indirect cost (or overhead) as it promotes the brand or product line as a whole and cannot be traced to a single bicycle.
D. IT system for ordering materials: This is a manufacturing overhead or administrative expense. The cost of the system supports the entire procurement and production process, not the creation of one specific bicycle.

1. Drury, C. (2018). Cost and Management Accounting. 10th ed. Cengage Learning. In Chapter 2, 'An introduction to cost terms and concepts,' direct costs are defined as 'costs that can be specifically and exclusively identified with a particular cost object.' It explicitly categorises direct materials (e.g., raw materials like rubber for a tire) and direct labour (e.g., assembly workers' wages) as the primary examples of direct costs.

2. Bhimani, A., Horngren, C. T., Datar, S. M., & Rajan, M. (2019). Management and Cost Accounting. 7th ed. Pearson Education. Chapter 2, 'An Introduction to Cost Terms and Purposes,' defines direct costs as those "related to the particular cost object and can be traced to it in an economically feasible... way." It contrasts this with indirect costs like marketing or IT systems, which are common to multiple cost objects and cannot be easily traced.

3. MIT OpenCourseWare. (2007). 15.963 Management Accounting and Control, Spring 2007. Lecture Notes, Session 2 - Cost: Concepts, Behavior, and Estimation. This courseware defines direct costs as including direct materials ("materials that become part of the product") and direct labor ("wages of production employees who work directly on the product"). It classifies costs like advertising and general administrative systems as indirect overheads.