Classifying Direct vs. Indirect Costs for a Meal

Steps:

• Direct costs trace directly to producing a specific meal, like ingredients used in it.
• Indirect costs support overall operations but cannot be allocated precisely to one meal, such as fixed overheads.
• Classify: 1 (wages) is direct as staff time ties to meal preparation; 3 (ingredients) is direct as it varies per meal.
• Classify: 2 (depreciation) and 4 (rent) are indirect as they are fixed and spread across all meals.

Why D is correct:

• Indirect costs are non-traceable overheads per cost accounting definitions, so depreciation and rent apply broadly, not to individual meals.

Why the others are wrong:

• A includes 1, a direct labor cost traceable to meals.
• B includes 3, a variable direct material cost per meal.
• C includes only directs, omitting true indirects.

Final answer: D