What is the Total Costs Formula?

What is the Total Costs Formula?

• A. Indirect Costs minus Direct Costs
• B. Indirect Costs divided by Direct Costs
• C. Direct Costs plus Indirect Costs
• D. Direct Costs times Indirect Multiplier

Answer: (C)

Total costs are found by adding all costs incurred: Direct costs plus indirect costs. Direct costs are those that can be traced to a specific product or service, such as raw materials and direct labor. Indirect costs are overhead costs that support operations but aren’t tied to a single item, like utilities and rent. By summing them, you capture the full amount spent. The other options don’t fit because subtracting indirect costs from direct costs ignores overhead, dividing indirect by direct yields a ratio, and multiplying by an “indirect multiplier” isn’t a standard method for calculating total costs.

Total costs are found by adding all costs incurred: Direct costs plus indirect costs. Direct costs are those that can be traced to a specific product or service, such as raw materials and direct labor. Indirect costs are overhead costs that support operations but aren’t tied to a single item, like utilities and rent. By summing them, you capture the full amount spent. The other options don’t fit because subtracting indirect costs from direct costs ignores overhead, dividing indirect by direct yields a ratio, and multiplying by an “indirect multiplier” isn’t a standard method for calculating total costs.