Within the context of financial distress, which type of costs are generally easier to measure?

• A. Indirect costs, such as lost sales and damaged reputation
• B. Direct costs, such as legal and administrative fees
• C. Intangible costs, such as employee morale decline
• D. Opportunity costs related to foregone investments

Answer: (B)

Verified step by step guidance

1. Understand the context of the question: The problem is asking about the types of costs that are easier to measure during financial distress. This requires distinguishing between direct, indirect, intangible, and opportunity costs.
2. Define the key terms: Direct costs are expenses that can be directly attributed to a specific activity or event, such as legal and administrative fees. Indirect costs are harder to trace and include things like lost sales or damage to reputation. Intangible costs refer to non-physical impacts, such as employee morale decline. Opportunity costs represent the benefits foregone by choosing one option over another, such as missed investment opportunities.
3. Analyze the measurability of each cost type: Direct costs are typically easier to measure because they are explicit and often documented in financial records. Indirect, intangible, and opportunity costs are more subjective and harder to quantify because they involve estimations or non-monetary factors.
4. Focus on the question's emphasis on 'easier to measure': Since direct costs are explicit and recorded, they are generally easier to measure compared to the other types of costs mentioned.
5. Conclude that the correct answer is 'Direct costs, such as legal and administrative fees,' because these costs are tangible, documented, and quantifiable, making them easier to measure during financial distress.