How does direct cost tracing improve cost accuracy?
A)It identifies the cause-and-effect relationship between direct costs and indirect costs.
B)It identifies the cause-and-effect relationship between activities and non-activities.
C)It reclassifies costs or costs pools that vary with the quantity of a single activity cost driver as direct.
D)It makes no assumptions about the cause-and-effect relationship between direct costs and activities.
E)Because with a greater number of cost pools, it does not have to be concerned with the overhead costs used by different products.

Question

Quizplus · Accepted Answer

Direct cost tracing reclassifies costs or cost pools that vary with the quantity of a single activity cost driver as direct costs. This improves cost accuracy by accurately linking the cost to the specific product or activity that caused it, rather than allocating it based on a predetermined rate or arbitrary method.

How Does Direct Cost Tracing Improve Cost Accuracy