Which of the following is INCORRECTLY matched with its classification as a cost by nature or expenditure type?

Costs by expenditure type are classified into Material costs, Labour costs, and Overhead/Expenses. Royalty paid per unit produced is not a material cost — it is a direct expense because it is directly traceable to production activity, but it does not represent a physical material input. It is classified under direct expenses, not material cost. Raw material is correctly a material cost; factory supervisor salary is a labour cost; depreciation is an overhead; and advertisement is a selling and distribution overhead. The distinction between direct expenses (like royalty) and material costs is a commonly tested classification trap in cost accounting.