Question

Reebok is assigning costs to its various regional and national sales offices, then the salary of the sales manager in its Tokyo office would be a _________ cost of that office?

1) Fixed
2) Variable
3) Direct
4) Indirect

Answer 1

The sales manager's salary in Reebok's Tokyo office is a direct cost, as it is an expense that can be directly attributed to the functioning of that particular office.

Step-by-step explanation:

The salary of the sales manager in Reebok's Tokyo office would be a direct cost of that office. In accounting, direct costs are expenses that can be directly attributed to a specific cost center or department. For the Tokyo sales office, the manager's salary is a cost that is directly related to the operations of that office, similar to how the fixed costs of a barber shop in an example include expenses like rental space and equipment that do not vary with the level of production.

Unlike variable costs, which fluctuate with the level of output, the sales manager's salary likely remains constant irrespective of the sales volume, making it a direct, but not variable, cost. Direct costs are important for tracking the profitability of individual segments within a company.