The classification of a cost as either direct or indirect depends primarily on:
A)the computer tracing system within the organisation.
B)the definition of the cost object.
C)the knowledge of the accountant.
D)the type of business.

Question

Quizplus · Accepted Answer

Direct and indirect costs are classified based on the cost object, which is the product, department, or activity to which the cost is assigned. Costs that can be easily traced and assigned to a cost object are considered direct costs, while costs that cannot be easily traced and assigned are considered indirect costs. Therefore, the definition of the cost object plays a crucial role in determining whether a cost is direct or indirect. The other options are not primary factors in the classification of costs.

The Classification of a Cost as Either Direct or Indirect