What determines the difference between a direct and an indirect cost?
A)Whether it changes when activity levels change.
B)Whether it is relevant to a particular decision.
C)Whether it can be traced to a specific cost object.
D)Whether it is related to manufacturing or nonmanufacturing activities.

Question

Quizplus · Accepted Answer

The key factor that determines whether a cost is direct or indirect is whether it can be traced to a specific cost object. Direct costs are costs that can be easily and accurately traced to a particular product, service, or department. Indirect costs, on the other hand, cannot be easily traced to a particular cost object and are instead allocated to multiple products or departments based on some kind of allocation method, such as a cost driver. While the other factors listed (activity level changes, relevance to a particular decision, and relation to manufacturing) may impact how a cost is categorized or used in decision-making, they do not ultimately determine whether a cost is direct or indirect.

What Determines the Difference Between a Direct and an Indirect