A costing system traces direct costs and allocates indirect costs to products.

Name: A costing system traces direct costs and allocates indirect costs to products.
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Question

Quizplus · Accepted Answer

This is a defining characteristic of a costing system. Direct costs are easily identifiable with specific products, while indirect costs—such as utilities, rent, and administrative expenses—must be allocated to products using a predetermined cost driver, such as machine hours or labor hours.

A Costing System Traces Direct Costs and Allocates Indirect Costs