Question

Assertion (A): Indirect costs are always fixed costs.

Reasoning (R): Indirect costs are expenses that cannot be directly attributed to a specific cost object.

Options

• A is true but R is false.

• A is false but R is true.

• Both A and R are true and R explains A.

• Both A and R are true but R does not explain A.

Answer 1

A is false but R is true.

Explanation:

The Assertion (A) is false because indirect costs (overheads) can be fixed or variable. For example, factory rent is a permanent indirect cost, whereas factory energy and machinery lubricants are variable indirect costs. The reasoning (R) is true because indirect costs are aggregate overheads that cannot be immediately tracked or assigned to a single, unique cost object or product.