Classifying a cost as either direct or indirect depends upon
A) the behaviour of the cost in response to volume changes.
B) whether the cost is expensed in the period in which it is incurred.
C) whether the cost can be identified with the cost object.
D) whether an expenditure is avoidable or not in the future.
E) the inventory classification system.

Question

Quizplus · Accepted Answer

Direct costs can be traced directly to a specific cost object, while indirect costs cannot be easily attributable to a cost object. Thus, the ability to identify a cost with a particular cost object is the key criterion for distinguishing between direct and indirect costs. The other options may be relevant in certain contexts, but they do not provide the basis for the direct/indirect cost distinction.

Classifying a Cost as Either Direct or Indirect Depends Upon