Which of the following statements concerning direct and indirect costs is NOT true?

• A. Direct costs can be easily traced to a specific cost object.
• B. Indirect costs are always variable costs.
• C. Indirect costs cannot be conveniently traced to a single cost object.
• D. Direct materials used in production are considered direct costs.

Answer: (B)

Verified step by step guidance

1. Understand the definitions of direct and indirect costs: Direct costs are expenses that can be easily and directly traced to a specific cost object, such as a product, department, or project. Indirect costs, on the other hand, are expenses that cannot be conveniently traced to a single cost object and are often shared across multiple cost objects.
2. Analyze the statement 'Direct costs can be easily traced to a specific cost object': This is true because direct costs, such as direct materials and direct labor, are directly attributable to a specific cost object.
3. Evaluate the statement 'Indirect costs are always variable costs': This is NOT true. Indirect costs can be either fixed (e.g., rent, utilities) or variable (e.g., indirect materials used in production). Therefore, this statement is incorrect.
4. Review the statement 'Indirect costs cannot be conveniently traced to a single cost object': This is true because indirect costs, such as factory overhead, are shared across multiple cost objects and cannot be directly assigned to one specific object.
5. Assess the statement 'Direct materials used in production are considered direct costs': This is true because direct materials are a type of direct cost that can be directly traced to the production of specific goods or services.