Which term describes spreading the upfront payment of a service over its billable hours?

• A. Fully loaded costs
• B. Amortized costs
• C. CapEx vs OpEx
• D. COGS

Answer: (B)

Spreading an upfront payment over the hours a service is used is amortization. When you pay for a service before it’s consumed, you treat that payment as a prepaid asset and gradually expense it across the period or the usage of the service. Allocating the cost by the billable hours aligns expenses with the benefit received, which is exactly what amortized costs represent.

The other terms don’t fit as neatly. Fully loaded costs describe all costs included in a price (overhead, margins, etc.), not the allocation of a prepaid amount over time. CapEx vs OpEx distinguishes capital expenditures from operating expenses, not the method of allocating a prepaid service. COGS refers to the cost of goods sold, tied to producing or delivering goods, not prepaid service amortization.