2. In managerial accounting, which type of cost do managers typically have more control over, and why?

• A. Indirect costs, because they are allocated across multiple cost objects and are easier to adjust.
• B. Direct costs, because they can be traced specifically to a cost object and managed more easily.
• C. Both direct and indirect costs are equally controllable by managers.
• D. Neither direct nor indirect costs can be controlled by managers.

Answer: (B)

Verified step by step guidance

1. Understand the definitions of direct and indirect costs: Direct costs are expenses that can be directly traced to a specific cost object, such as a product or department. Indirect costs, on the other hand, are expenses that cannot be directly traced to a single cost object and are typically allocated across multiple cost objects.
2. Consider the nature of control managers have over these costs: Direct costs are easier to manage because they are specifically tied to a cost object, allowing managers to make decisions that directly impact these costs, such as negotiating prices for raw materials or adjusting labor hours.
3. Analyze why indirect costs are less controllable: Indirect costs, such as utilities or administrative expenses, are shared across multiple cost objects and are often allocated based on predetermined rates or formulas. This makes them harder for managers to adjust or control directly.
4. Evaluate the options provided in the problem: The correct answer is that managers typically have more control over direct costs because they can be traced specifically to a cost object and managed more easily.
5. Conclude by emphasizing the importance of understanding cost behavior: Recognizing which costs are controllable and how they impact decision-making is crucial for effective managerial accounting and cost management.