Which of the following is classified as a direct cost?

• A. Interest
• B. Marketing Expenses
• C. Salary of Management
• D. Research and Development

Answer: (A)

The classification of costs as direct or indirect is essential in accounting and financial analysis. Direct costs are those that can be directly attributed to a specific product or service. They vary directly with the level of production or service provision.

In the context of this question, interest is generally considered a variable cost associated with financing activities. It is one of the costs that can be directly tied to the financing of a particular project or investment in business. If a loan is taken specifically for a project or product line, the interest on that loan can be seen as a direct cost of that project.

On the other hand, marketing expenses, salary of management, and research and development are typically classified as indirect costs. Marketing expenses often cover promotional activities that benefit the entire company rather than a specific product. The salary of management is also an indirect cost, as it supports overall operations rather than being exclusive to a single product line. Research and development costs, while they may contribute directly to new products, are usually considered indirect because they support long-term projects and are not tied to any single product's immediate production costs.

Understanding these distinctions helps in accurate cost allocation, budgeting, and financial analysis.