While planning your budget, you decide to categorize your types of costs. Labor, the biggest cost on the project, is best categorized as a(n):
A. Fixed cost
B. Variable cost
C. Direct cost
D. Indirect cost
Answer: C. Direct cost
Direct costs are those that attribute directly to a particular project. Conversely, indirect costs typically benefit multiple projects, such as overhead costs. One way to look at fixed costs vs. variable costs is that the former do not change as production changes.
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