An efficient management accounting system traces direct costs and allocates indirect costs to products.

Question

Quizplus · Accepted Answer

An efficient management accounting system should trace all direct costs related to the production of a given product, such as the cost of materials and labor. Indirect costs, which are not directly linked to the production of a specific product (e.g., rent, utilities, and overhead costs), must also be allocated to products based on some form of costing method (such as activity-based costing) to provide an accurate picture of their true cost.

An Efficient Management Accounting System Traces Direct Costs and Allocates