Which of the following is true of refinement of a costing system?
A) While refining a costing system, companies should identify as many indirect costs as is economically feasible.
B) A homogeneous cost pool will use multiple cost drivers to allocate costs.
C) It reduces the use of broad averages for assigning the cost of resources to cost objects.
D) It is likely to yield the most decision-making benefits when direct costs are a high percentage of total costs.

Question

Quizplus · Accepted Answer

Refinement of a costing system involves the use of more specific cost drivers and reducing the use of broad averages for assigning costs to cost objects. The use of homogeneous cost pools is not recommended as it may result in inaccurate cost allocations. The percentage of direct costs in total costs may affect the overall accuracy of the costing system, but it is not a defining characteristic of refinement. Identifying as many indirect costs as feasible is not necessarily a priority as it may not be cost-effective to do so.

Which of the Following Is True of Refinement of a Costing