4. Booker Company operates a factory with two departments, X and Y. The rent paid on the manufacturing facility would most likely be allocated to departments X and Y on the basis of:

a. Direct labor hours.

b. Machine hours.

c. Square footage occupied.

d. Units sold.

3. Managers of a supermarket are considering whether to add a new deli department. In reaching this decision, the managers should consider:

a. Direct costs only.

b. Neither direct nor indirect costs.

c. Both direct and indirect costs.

d. Indirect costs but not direct costs.

2. Which of the following costs is most likely to be directly traceable to a specific department in a retail clothing store?

a. The cost of heating and air conditioning.

b. The cost of supplies.

c. The cost of commissions paid to the sales staff.

d. All of the above answers are correct.

1. Which of the following regarding direct costs is a correct statement?

a. Direct costs are always fixed costs.

b. Direct costs are always variable costs.

c. Direct costs are not easily traced to cost objects.

d. Direct costs can either be fixed or variable.