Which of the Following Statements Is True of Direct Costs

question 127

Multiple Choice

Which of the following statements is true of direct costs?

• A) A direct cost of one cost object is a true sense of the budgeted costs.
• B) All variable costs are direct costs.
• C) A direct cost of one cost object can be an indirect cost of another cost object.
• D) All fixed costs are direct costs.

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Definitions:

Marginal Product

The additional output that is generated by employing one more unit of a specific input, ceteris paribus.

Total Fixed Cost

The sum of all expenses that remain constant regardless of the level of production or output within a business.

Average Fixed Cost

Calculated by dividing total fixed costs by the quantity of output produced, showing the fixed cost per unit.

Sunk Cost Fallacy

The misconception that future decisions should be influenced by previously incurred costs that cannot be recovered.