Which of the following statements about the direct/indirect cost classification is true?
A) Indirect costs are always traced.
B) Indirect costs are always allocated.
C) The design of sales target affects the direct/indirect classification.
D) The direct/indirect classification depends on the cost control measures.

Question

Quizplus · Accepted Answer

Indirect costs are those costs that cannot be easily traced to a specific product or service and therefore are allocated to products based on some predetermined method or allocation base. On the other hand, direct costs are those that can be easily traced to a specific product or service. The classification of costs as direct or indirect does not depend on cost control measures or sales targets, but rather on the nature of the cost itself.

Which of the Following Statements About the Direct/indirect Cost Classification