Indirect expenses can be identified with a specific cost unit.

Indirect expenses can be identified with a specific cost unit.

• A. True
• B. False
• C. Not allowed
• D. Sometimes

Answer: (A)

Indirect expenses are the costs that can’t be traced directly to a single unit, but they can still be attached to each cost unit by using an absorption basis. In practice, you pick a driver—such as machine hours, labour hours, or units produced—and apply a rate to allocate the total indirect costs across all units. By doing this, each unit carries a share of the indirect costs, so the indirect expenses are identified with a specific cost unit. For example, if total overhead is 50,000 and 10,000 units are produced, the overhead absorbed per unit would be 5, and that amount becomes part of the cost of each unit. Thus, the statement is true. The other options don’t fit because overheads are allocated to cost units using a chosen basis, not simply denied or left to be uncertain.

Indirect expenses are the costs that can’t be traced directly to a single unit, but they can still be attached to each cost unit by using an absorption basis. In practice, you pick a driver—such as machine hours, labour hours, or units produced—and apply a rate to allocate the total indirect costs across all units. By doing this, each unit carries a share of the indirect costs, so the indirect expenses are identified with a specific cost unit. For example, if total overhead is 50,000 and 10,000 units are produced, the overhead absorbed per unit would be 5, and that amount becomes part of the cost of each unit. Thus, the statement is true. The other options don’t fit because overheads are allocated to cost units using a chosen basis, not simply denied or left to be uncertain.