Which of these is an example of an indirect cost if Department M is the cost object?
A) Insurance on the organisation's building, part of which is occupied by Department M
B) Rent on the organisation's building, part of which is occupied by Department M
C) Commission paid to the sales persons in Department M
D) A and B

Question

Quizplus · Accepted Answer

Indirect costs are those costs that are not directly traceable to a specific cost object, such as a department, but are incurred for the common benefit of multiple cost objects. Insurance and rent for the organization's building, parts of which are occupied by Department M, are examples of indirect costs because they benefit the entire organization and cannot be directly attributed to Department M alone. In contrast, commissions paid to salespersons in Department M are direct costs because they can be directly traced to the department's activities.

Which of These Is an Example of an Indirect Cost