[amp_mcq option1=”line cost” option2=”staff cost” option3=”direct cost” option4=”indirect cost” correct=”option4″]
The correct answer is D. indirect cost.
A direct cost is a cost that can be easily and directly traced to a specific cost object. For example, the cost of raw materials used to produce a product is a direct cost of that product.
An indirect cost is a cost that cannot be easily and directly traced to a specific cost object. For example, the cost of the plant manager’s salary is an indirect cost of the products produced in the plant.
A line cost is a cost that is directly related to the production of goods or services. For example, the cost of direct materials is a line cost.
A staff cost is a cost that is not directly related to the production of goods or services. For example, the cost of the plant manager’s salary is a staff cost.
Therefore, the cost which is related to specific cost object and cannot be economically traceable is classified as an indirect cost.