Multiple Choice
Which of the following is the typical risk equation used in accounting and finance?
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1. Introduction to Accounting
Types of Accounting
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Which of the following is NOT considered an organizational sustaining cost?
A
CEO's salary
B
Corporate office utilities
C
Factory rent
D
Direct materials used in production
Verified step by step guidance1
Understand the concept of organizational sustaining costs: These are costs that support the overall organization and are not directly tied to specific products or production activities. Examples include CEO's salary, corporate office utilities, and factory rent.
Review the nature of direct materials used in production: Direct materials are costs directly associated with the production of goods. They are considered product costs, not organizational sustaining costs.
Compare the options provided: CEO's salary, corporate office utilities, and factory rent are all examples of organizational sustaining costs because they support the organization as a whole rather than specific production activities.
Identify the exception: Direct materials used in production are directly tied to the manufacturing process and are classified as product costs, not organizational sustaining costs.
Conclude that the correct answer is direct materials used in production, as it does not fit the definition of an organizational sustaining cost.
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