Oil to keep factory machinery lubricated is an example of what type of cost?

The correct choice highlights that oil used to keep factory machinery lubricated is classified as an indirect material and falls under overhead costs.

Indirect materials refer to materials that are necessary for the manufacturing process but are not directly traceable to specific products. In this case, the oil is essential for the machinery's operation, enabling it to function effectively in the production process. However, since it cannot be linked directly to the production of a specific unit of product, it is categorized as an indirect material.

Overhead costs encompass all the costs involved in the production process other than direct materials and direct labor. These costs include items such as factory utilities, salaries of indirect labor, and indirect materials like the oil in question. Therefore, since the oil does not apply directly to any one product but supports the overall functioning of the factory, its classification as overhead is accurate.

The choice clearly captures the nature of the cost associated with the lubrication of machinery within the manufacturing environment, thus reinforcing the idea that some costs are not easily attributed to specific products but are still vital for the production process.