- 1 Marks
Question
Assigning indirect costs to cost centres is known as:
A. Cost allocation
B. Sales tracing
C. Sales allocation
D. Cost tracing
E. Allotment
Answer
A. Cost allocation
Explanation:
Cost allocation is the process of assigning indirect costs to various cost centres. These indirect costs, such as overheads, cannot be directly traced to a single product or service, so they are distributed or allocated to different departments or cost centres based on a reasonable and systematic approach. The correct answer is A. Cost allocation because it refers to the method of distributing shared or indirect costs across different areas within an organization.
- Tags: Cost Allocation, Cost Centres, Indirect Costs
- Level: Level 1
- Topic: Cost Classifications
- Series: MAY 2023
- Uploader: Theophilus