Whether a company traces costs directly to an output unit or not depends upon
A)the materiality of the contribution a cost makes to the total cost per output unit.
B)the amount of similar costs in the cost assignment.
C)the effect of cost tracing on overhead.
D)the employment of cost management.
E)the amount of customer satisfaction.

Question

Quizplus · Accepted Answer

The decision to trace costs directly to an output unit depends on the materiality of the contribution that a cost makes to the total cost per output unit. If the cost is significant enough to have an impact on the total cost per unit, it may be worth tracing it directly to that unit. However, if the cost is not significant, it may be more efficient to allocate it to a broader cost pool and distribute it across multiple output units. The other options listed are not relevant factors in this decision.

Whether a Company Traces Costs Directly to an Output Unit