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Horngren's Cost Accounting 17th Edition

Horngren's Cost Accounting (17th Edition)

Book Edition17th Edition
Author(s)Datar, Rajan

Chapter 4, End of Chapter, Decision Points, Exercise 1

Page 134

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The five major parts of the costing system represented in a systematic way are termed as building-blocks.


A costing system represents the diagrammatic view of cost concepts in order to present a systematic way of using the resources by the cost objects. 


Cost objects are the products or services that are being produced or rendered. Assignment of direct costs is termed as cost tracing, whereas the assignment of indirect costs is known as cost allocation. Cost pool is the grouping of homogenous cost items. These individual cost items are linked on the basis of cost allocation. 

Verified Answer

Building-block of a costing system consists of five constituents, which are cost object, direct cost of a cost object, indirect cost of a cost object, cost pool, and cost allocation base. 

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Page 134