Final answer:
Indirect costs cannot be identified with or traced to a cost object. Option C is correct.
Step-by-step explanation:
Indirect costs, unlike direct costs or prime costs, cannot be specifically attributed or directly linked to a particular cost object. These expenses encompass a broad category of overhead costs that are not exclusively tied to a single product, project, or department. Instead, they support multiple activities across an organization, such as utilities, administrative salaries, or general maintenance. As they lack a direct correlation to a specific cost object, allocating or assigning these costs necessitates the use of allocation methods like cost drivers or activity-based costing.
In accounting, indirect costs pose a challenge in accurately assigning expenses to products or services, often requiring estimation or allocation based on usage patterns or predetermined allocation rates. Therefore, when analyzing costs for decision-making or determining the profitability of individual items or projects, understanding and appropriately handling indirect costs are crucial.
Correct answer: c. Indirect costs