How do we assign indirect costs to cost objects?
A) based on the proportion of indirect costs to total costs
B) based on the proportion of indirect costs to direct costs
C) in proportion to the cost object's use of a cost-allocation base
D) based on the amount of direct cost used by the cost object

Question

Quizplus · Accepted Answer

Indirect costs are allocated to cost objects based on the cost object's use of a cost-allocation base. This means that the indirect costs are allocated in proportion to the activity or output of the cost object, which is measured by a cost-allocation base. This method ensures that the indirect costs are assigned fairly to the cost object based on the amount of resources it consumes. A and D are not accurate methods for assigning indirect costs, while B only considers the direct costs and not the full cost of the product/service.

How Do We Assign Indirect Costs to Cost Objects