Which of the Following Is True of Indirect Costs

question 119

Multiple Choice

Which of the following is true of indirect costs?

• A) Indirect costs are always considered sunk costs.
• B) All indirect costs are included in cost of goods sold.
• C) Indirect costs always vary in direct proportion to the level of production.
• D) Indirect costs cannot be traced to a particular cost object in an economically feasible way.

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Definitions:

Factory Utilities

Costs associated with the utilities consumed in the production process, such as electricity, gas, and water.

Overhead Allocation Base

A measure or criteria used to distribute indirect costs to various products, services, or departments based on their usage or consumption.

Direct Labor Hours

The total time workers spend producing a product or performing a specific service, directly contributing to the output.

Plantwide Overhead Rate

A single overhead absorption rate used throughout an entire factory or plant, applied uniformly to all cost objects irrespective of the department incurring the overhead.