Which of the following statements is true of direct costs?
A) A direct cost of one cost object is a true sense of the budgeted costs.
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

Direct costs are costs that can be easily and conveniently traced to a specific cost object, such as a product, department, or project. However, a direct cost of one cost object can 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 another department. Therefore, option C is the correct statement about direct costs. Option A is not necessarily true, as budgeted costs may include both direct and indirect costs. Option B is incorrect, as not all variable costs are direct costs. Option D is also incorrect, as not all fixed costs are direct costs.

Which of the Following Statements Is True of Direct Costs