Question

_______ is one which is not affected or altered by a change in the level or nature of business activity.

• A. Indirect cost
• B. Direct cost
• C. Sunk cost
• D. Incremental cost

Answer 1

The correct option is A Indirect cost

Indirect costs are indirectly related to the production process and can not uniquely be linked to a specific process, product or department of the firm. These usually consists of fixed costs such as rent, purchase of machinery etc. Fixed costs have to be incurred irrespective of the level of production, and must be paid even if no production is happening.