Distinguish direct costs from indirect costs. A. Direct costs are historical or
ID: 2328886 • Letter: D
Question
Distinguish direct costs from indirect costs.
A. Direct costs are historical or past costs incurred while indirect costs are predicted or forecasted costs.
B. Direct costs are those that change in total in proportion to changes in the related level of total activity or volume while indirect costs are those that remain unchanged in total for a given time period, despite wide changes in the related level of total activity or volume.
C. Direct costs include the acquisition costs of all materials that eventually become part of the cost object and can be traced to the cost object in an economically feasible way while indirect costs include compensation of all manufacturing labor that can be traced to the cost object in an economically feasible way.
D. Direct costs are related to the particular cost object and can be traced to that cost object in a cost-effective way while indirect costs are related to the particular cost object but cannot be traced to that cost object in a cost-effective way.
Explanation / Answer
The correct distinction between direct costs and indirect costs is that direct costs are related to the particular cost object and can be traced to that cost object in a cost-effective way while indirect costs are related to the particular cost object but cannot be traced to that cost object in a cost-effective way.
Therefore, the correect answer is D.