Question

The term used to describe expenses that are incurred by a specific department is?

Answer 1

The term used to describe expenses that are incurred by a specific department is direct expenses.

Accounting divides business expenses into two categories: operating expenses and non-operating expenses.

The operating expenses are associated with the primary activities of the business, such as the cost of goods sold.

Non-operating expenses, on the other hand, are those incurred that are unrelated to the primary activities of the business entity.

• Option a. is not correct. Indirect expenses aid in the operation of the business but are not directly traceable to the products, such as corporate office rent, employee salaries, and so on. In general, indirect expenses are recorded on the income statement under the heading "Selling and general administrative expense."
• Option b. is also wrong. There are no such things as margin costs.
• Option c is not correct. Departmental expenses are expenses, but they are not expenses incurred by a particular department.
• Option d. is the correct response. Direct Expenses are expenses incurred solely for the benefit of specific departments.

Hence, direct expense is the answer.

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