What is Cost Tracing

Cost tracing refers to the assignment of accumulated costs that have a direct relationship to a particular cost object. It is worth noting that cost assignment is a general term for assigning costs, whether direct or indirect, to a cost object.  On the other hand, cost tracing is a specific term for assigning direct costs.

Sometimes management has to decide if it is economically feasible to determine if a cost is direct or indirect. It is because the expense of tracing the cost to a cost object may be greater than the benefit of having an accurate value for that cost object.