Which of the Followings Statements Is Correct Regarding Direct and Indirect

question 157

Multiple Choice

Which of the followings statements is correct regarding direct and indirect costs?

• A) Direct costs cannot easily be traced to a cost object, whereas indirect costs can be easily traced to a cost object.
• B) Direct costs can be easily traced to a cost object, whereas indirect costs cannot be easily traced to a cost object.
• C) Direct costs are always relevant to a particular cost decision, whereas indirect costs are never relevant to a cost decision.
• D) Direct costs are never relevant to a particular cost decision, whereas indirect costs are always relevant to a cost decision.

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Definitions:

Depreciation Basis

The initial cost of an asset that is used to calculate depreciation expense over the asset's useful life.

Decedent's Basis

The value assigned to a deceased person's property for tax purposes, determining the basis for heirs or beneficiaries for capital gains tax calculations when they sell the property.

Ordinary Expense

Regular and necessary costs incurred in running a business that are tax-deductible.

Taxpayer's Business

Refers to any enterprise or activity undertaken by an individual with the intention of earning profit.