COST ACCOUNTING
INTRODUCTION TO COST ACCOUNTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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can be easily and accurately traced to a cost object
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is hard to trace
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should never be assigned to a cost object.
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Detailed explanation-1: -Indirect costs, on the other hand, are expenses unrelated to producing a good or service. An indirect cost cannot be easily traced to a product, department, activity, or project.
Detailed explanation-2: -In general, indirect costs are costs that benefit more than one specific project or good that is being produced and cannot be easily traced to a single project or good being produced.
Detailed explanation-3: -Because they cannot be traced directly to a specific cost object, indirect costs must instead be allocated to all of the products they are used to produce. EXAMPLE: For a manufacturer of rock climbing gear, the cost of nylon for climbing ropes can be directly traced-it’s obviously a cost of producing the ropes.
Detailed explanation-4: -Direct and indirect costs are the major costs involved in the production of a good or service. While direct costs are easily traced to a product, indirect costs are not.
Detailed explanation-5: -A direct cost is a cost that cannot be easily traced to the particular cost object under consideration.