Understanding the hierarchy of costs is critical when allocating costs to products.

Question

Quizplus · Accepted Answer

Knowing the hierarchy of costs (direct, indirect, variable, fixed, etc.) allows companies to accurately allocate costs to products based on their level of importance and impact on the production process. This helps in determining the true cost of producing each product and aids in making informed decisions about pricing and profitability.

Understanding the Hierarchy of Costs Is Critical When Allocating Costs