Distinguishing Direct vs. Indirect Costs

Steps:

• Recall that indirect costs cannot be directly traced to a specific product or job, unlike direct costs (e.g., materials, labor).
• Examine each cost label (1–4) based on traceability: direct if allocable to one unit, indirect if shared across multiple.
• Identify costs 2 and 4 as shared overheads (e.g., factory rent, utilities), not directly traceable.
• Confirm costs 1 and 3 as direct (e.g., raw materials, direct labor), traceable to production.

Why C is correct:

• Option C selects only 2 and 4, matching the definition of indirect costs as non-traceable overheads per cost accounting principles.

Why the others are wrong:

• A includes 1 and 3, which are direct costs.
• B includes 1, a direct cost.
• D excludes 2, an indirect cost.

Not enough information on exact labels of costs 1–4 to fully verify, but based on standard examples, C fits.

Final answer: C