John is the project manager for the ABC project. He is finalizing the budget of the project. He is
concerned about the direct costs involved in the project. Which of the following can be considered
a direct cost in the project?
A.
Cost of electrical utilities
B.
Salaries of management directly involved in the project
C.
Subcontract cost
D.
Accounting support cost
Explanation:
Direct costs can be traced directly to a cost object such as a product. In other words, direct costs
do not have to be allocated to a product, department, or other cost object. For example, if a
company produces Chairs, the cost of the wood and the cost of the carpenter are direct costs.
These costs are traceable by the production department. On the other hand, the rent of the
production area, warehouse, and office is not a direct cost.
Answer options A, D, and B are incorrect. These are examples of indirect costs.