This refers to assigning a specific cost back to a specific activity, for example to a specific job or a product batch.
Cost tracing is more precise then general absorption costing, however it requires data on costs to be readily available (otherwise the cost of data collection may outweigh the benefits of more precise costing). It may be more appropriate for bespoke or one-off activities than generic mass production activities.
Cost tracing is a term normally found in management accounting.
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