When estimating future costs, information quality is higher when:
A) Costs must be allocated
B) The accounting system can trace relevant costs to a cost object
C) The regression Adjusted R-square is near zero
D) Most costs are fixed, rather than variable

Question

Quizplus · Accepted Answer

When the accounting system is able to trace relevant costs to a cost object, the information quality is higher as it provides a more accurate representation of the costs involved. Costs that can be directly attributed to a particular cost object can be more accurately estimated as compared to overhead costs that have to be allocated. Therefore, option B is the best choice for the statement.

When Estimating Future Costs, Information Quality Is Higher When