Which statement is true?
A)A direct cost of one cost object cannot be an indirect cost of another cost object.
B)All variable costs are direct costs.
C)A direct cost of one cost object can be an indirect cost of another cost object.
D)All fixed costs are direct costs.

Question

Quizplus · Accepted Answer

A direct cost is a cost that can be easily and specifically traced to a particular cost object, such as a product or department. An indirect cost is a cost that cannot be easily or specifically traced to a particular cost object. It is possible for a direct cost of one cost object to be an indirect cost of another cost object. For example, the salary of a supervisor may be a direct cost of one department but an indirect cost of the company as a whole. Option A is incorrect because a direct cost can be an indirect cost of another cost object. Option B and D are incorrect because not all variable costs or fixed costs are necessarily direct costs.

Which Statement Is True