An Internal Cost Is Best Defined as the Cost of an Activity

question 148

Multiple Choice

An internal cost is best defined as the cost of an activity paid for by

• A) the individual who is engaged in the activity.
• B) the government.
• C) a third party.
• D) a free-rider.
• E) the individual and the third party.

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Definitions:

Factory Overhead

All indirect costs related to manufacturing, such as utilities, maintenance, and salaries of indirect labor, not directly tied to production.

Direct Materials

Materials that can be directly linked to the creation of a product and represent a large part of the cost of production.

Direct Labor

The labor cost of workers who are directly involved in the production of goods or the provision of services.

Factory Overhead

All indirect costs associated with manufacturing, excluding direct labor and direct materials.