Which of the Following Statements Regarding Direct and Indirect Costs

question 17

Multiple Choice

Which of the following statements regarding direct and indirect costs is true?

• A)Direct costs are always variable and indirect costs are always fixed.
• B)Sunk costs are always direct, and opportunity costs are always fixed.
• C)The distinction between a direct and indirect cost depends on the product, activity, or department to which the cost pertains.
• D)If a cost is indirect to a department within a plant, it will also be indirect for the plant as a whole.

---

Definitions:

General Objective

A broad primary goal or aim that an organization or individual plans to achieve in the long term.

Financial Reporting

The procedure of making known the financial situation of an organization to its management, those who invest in it, and the government.

External Users

Individuals or entities outside a company who use financial information to make decisions about the company, such as investors, creditors, and regulatory bodies.

Conceptual Framework

A structure of principles and guidelines that supports the creation of accounting standards and helps in the preparation of financial reporting.