Indirect Costs

question 161

Multiple Choice

Indirect costs:

• A)often comprise a large percentage of overall costs assigned to a cost object
• B)specifically exclude marketing costs
• C)cannot be used for external reporting
• D)are treated as period costs and not as product costs

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Definitions:

Variable Cost

Costs that vary directly with the level of production or sales volume, such as materials and labor.

Fixed Costs

Costs that do not change with the amount of goods or services produced, such as rent, salaries, and insurance.

Break-Even Point

The point at which total costs and total revenue are equal, resulting in no net gain or loss.

Variable Cost

A cost that changes in proportion to the level of output or activity.