Continuation of pay is typically considered which type of cost in an accident?

Continuation of pay is typically considered which type of cost in an accident?

• A. Direct cost
• B. Indirect cost
• C. Intangible cost
• D. Sunk cost

Answer: (A)

Direct costs are expenses that can be traced to a specific incident. When an employee is off work due to an accident and the company continues to pay wages, that payroll expense is directly tied to the incident. It wouldn’t occur if the accident hadn’t happened and it can be allocated to the particular accident, making it a direct cost. In contrast, indirect costs cover broader fallout like lost productivity, overtime for others, or production delays; intangible costs involve non-monetary impacts such as morale or pain and suffering; and sunk costs are past expenditures that can’t be recovered and aren’t part of current decision-making.

Direct costs are expenses that can be traced to a specific incident. When an employee is off work due to an accident and the company continues to pay wages, that payroll expense is directly tied to the incident. It wouldn’t occur if the accident hadn’t happened and it can be allocated to the particular accident, making it a direct cost. In contrast, indirect costs cover broader fallout like lost productivity, overtime for others, or production delays; intangible costs involve non-monetary impacts such as morale or pain and suffering; and sunk costs are past expenditures that can’t be recovered and aren’t part of current decision-making.