Cost allocation is:
A)the process of tracking both direct and indirect costs associated with a cost object
B)the process of determining the actual cost of the cost object
C)the assignment of indirect costs to the chosen cost object
D)a function of cost tracing

Question

Quizplus · Accepted Answer

Cost allocation refers to the assignment of indirect costs to a particular cost object. It involves identifying the costs that are not directly related to the cost object and assigning them based on an allocation method, such as using allocation bases like labor hours or machine hours. Direct costs are already traceable to a specific cost object and do not require allocation. Cost allocation allows for a more accurate determination of the total cost of a product, service or project.

Cost Allocation Is