Final answer:
A direct cost item can be considered an indirect cost when it serves multiple purposes such as a salary that supports both production and other departments.
Step-by-step explanation:
To understand how a given direct cost item can be both a direct and indirect cost, it is essential to define explicit costs and implicit costs. Explicit costs are out-of-pocket expenditures, such as wages paid to employees or rent for office space. In contrast, implicit costs represent the opportunity cost of using resources the firm already owns, like the owner's time or usage of personal space for the business. The same cost item can be categorized as both direct and indirect, depending on the circumstance and perspective. For example, the salary of a worker who is directly involved in production is a direct cost.