Transportation Operations LINCS Practice Exam

What type of costs are classified as Indirect Costs?

1. Costs directly associated with production

2. Resource costs that cannot be directly traced to a specific cost object

3. Costs related to employee wages and benefits

4. Shipping and transportation costs

The correct answer is: Resource costs that cannot be directly traced to a specific cost object

The classification of indirect costs includes expenses that cannot be specifically attributed to a single cost object, such as a product, project, or department. Indirect costs often encompass overhead expenses that benefit multiple cost objects rather than being directly tied to a single one. In contrast to direct costs, which can be traced directly to a specific object—such as raw materials used in production or labor specifically allocated to one project—indirect costs might include utilities, administrative salaries, or office supplies. These expenses support overall operations but do not have a direct link to producing a particular item or providing a specific service. Understanding this distinction is crucial for accurate budgeting and cost allocation in transportation operations and other industries, as it helps organizations assess their overall financial health and make informed strategic decisions.