Direct transaction costs are defined as which of the following?

Direct transaction costs are defined as which of the following?

• A. Costs of detecting, transmitting the need for, and processing the material flow
• B. Costs of warehousing and storage
• C. Costs of product design
• D. Costs of customer service

Answer: (A)

Direct transaction costs are the costs tied to the actual exchange process—activities that start with recognizing a need and continue through communicating that need and moving the goods. This includes detecting demand, transmitting that demand to the supplier, and processing the material flow once an order is placed. These are the costs that make the transaction happen, such as order transmission and the handling steps that move the material through the system. Warehousing and storage are holding costs tied to keeping inventory. Product design costs are incurred during development, not during the transaction itself. Customer service costs relate to after-sale support, not the transaction and movement of the goods.

Direct transaction costs are the costs tied to the actual exchange process—activities that start with recognizing a need and continue through communicating that need and moving the goods. This includes detecting demand, transmitting that demand to the supplier, and processing the material flow once an order is placed. These are the costs that make the transaction happen, such as order transmission and the handling steps that move the material through the system.

Warehousing and storage are holding costs tied to keeping inventory. Product design costs are incurred during development, not during the transaction itself. Customer service costs relate to after-sale support, not the transaction and movement of the goods.