All costs that cannot be traced directly to a product or an activity are ignored for the purpose of costing.

Question

Quizplus · Accepted Answer

This statement is incorrect. Costs that cannot be directly traced to a product or activity are generally allocated or apportioned to those products or activities through indirect cost allocation methods, such as overhead rates or activity-based costing. Ignoring these costs can lead to inaccurate costing and pricing decisions.

All Costs That Cannot Be Traced Directly to a Product