Which of the following statements about how a manufacturer categorizes its costs and expenses is true?
A) A general expense is much like a direct cost in that it cannot be identified directly with a specific object of profit measurement, such as a territory, salesperson, or product
B) All costs are categorized as either direct or indirect-but never as both
C) A salesperson's salary would be a direct cost for his or her territory, but an indirect cost for the product sold
D) Advertising is a direct cost
E) A specific expense is much like a direct expense in that it can generally be identified with a wide range of products and functions

Question

Quizplus · Accepted Answer

A salesperson's salary would be considered a direct cost for their territory since it can be directly linked to the sales and revenue generated in that area. However, it would be considered an indirect cost for the product since the salesperson may sell multiple products within their territory. Therefore, option C is the correct statement.

Option A is incorrect because a general expense is an indirect expense, not a direct cost.

Option B is incorrect because some costs can be categorized as both direct and indirect. For example, a portion of a factory overhead cost may be directly attributable to a product, but it may also have some indirect costs associated with it.

Option D is incorrect because advertising is generally considered an indirect cost as it's difficult to measure its direct impact on sales or revenue.

Option E is incorrect because a specific expense is not necessarily similar to a direct expense as it may be applicable to only one type of product or function.

Which of the Following Statements About How a Manufacturer Categorizes