Answer (D) is correct . A cost incurred for the benefit of more than one cost objective is known as a common cost. Allocation of common costs is a persistent problem in responsibility accounting. For example, how should the costs of corporate headquarters be allocated to the segments of a conglomerate? Common cost is also a synonym for joint cost. In this sense, common costs are incurred in the production of two or more inseparable products (e.g., costs of refining petroleum into gasoline, diesel fuel, kerosene, lubricating oils, etc.) up to the point at which the products become separable (the split-off point).
Answer (A) is incorrect because A variable cost is one that varies directly with production activity.
Answer (B) is incorrect because Conversion cost is the cost of labor and overhead incurred to convert raw materials into a finished product.
Answer (C) is incorrect because Prime costs are the costs of materials and labor that are directly traceable to a cost objective.
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