Which of the following regarding direct costs is a correct statement?
A) Direct costs are always fixed costs.
B) Direct costs are always variable costs.
C) Direct costs are easily traced to cost objects.
D) Direct costs are never selling and administrative expenses.

Question

Quizplus · Accepted Answer

Direct costs are costs that can be easily traced to a specific cost object, such as a product or service. They can be either fixed or variable depending on the cost item. Direct costs are different from indirect costs, which cannot be easily traced to a specific cost object. Direct costs can include both production costs (such as materials and labor) and non-production costs (such as commissions and shipping costs). Direct costs are not exclusive to either fixed or variable costs, and can include both. Direct costs can also include selling and administrative expenses if they are directly related to the cost object.

Which of the Following Regarding Direct Costs Is a Correct