Nurse Executive Certification Practice Exam

In terms of cost analysis, which type of costs are shared costs considered?

1. Conformance costs

2. Nonconformance costs

3. Direct costs

4. Indirect costs

The correct answer is: Indirect costs

Shared costs are categorized as indirect costs because they cannot be directly attributed to a specific cost object, such as a product or service. Instead, these costs are incurred to support multiple activities, departments, or products within an organization. Examples of shared costs include utilities, administrative salaries, and rent, which benefit various sectors but cannot be allocated to any one area with precision. In contrast, direct costs can be assigned to a specific product or department, such as raw materials or direct labor associated with manufacturing. Conformance costs relate to expenses for ensuring products meet quality standards, while nonconformance costs are associated with the failure to meet these standards. Since shared costs are more generalized and result from multiple operations, they align with the classification of indirect costs within cost analysis.