Service costs incur indirect costs and the basis of allocating indirect costs requires the identification of:

Question

Quizplus · Accepted Answer

The basis of allocating indirect costs requires the identification of cost drivers. Cost drivers are the activities and events that cause indirect costs to be incurred. By identifying and analyzing cost drivers, companies can better allocate indirect costs to specific products, services, or departments. Cost centres, responsible departments, and service products are important aspects to consider when allocating indirect costs, but they are not the basis for the allocation method.

Service Costs Incur Indirect Costs and the Basis of Allocating