A company can increase the accuracy of its product cost information by converting indirect costs to direct costs.

Question

Quizplus · Accepted Answer

Converting indirect costs to direct costs can increase the accuracy of product cost information because it allows the company to allocate those costs more accurately to specific products or activities. Direct costs are costs that can be easily attributed to a specific product or activity, while indirect costs are more difficult to assign directly. By converting indirect costs to direct costs, the company can better understand the true costs of producing each product and adjust pricing or production levels accordingly.

A Company Can Increase the Accuracy of Its Product Cost