If a company wants to know the total cost attributable to a cost object, it must assign all direct and indirect costs to the cost object. Assigning a cost simply means that you are $$attaching$$ a cost to the cost object. Why? Because the cost object caused the company to incur that cost. In determining the cost of a Learjet $85,$ Bombardier assigns both the cost of the seats and the cost of running the manufacturing plant to the Learjet $85$s built at the plant.

Bombardier assigns direct costs to each Learjet $85$ by tracing those costs to specific airplanes. This results in a very precise cost figure, giving managers great confidence in the cost$$s accuracy. However, because Bombardier cannot trace indirect costs to specific airplanes, it must allocate these costs among all of the planes produced at the plant. The allocation process results in a less precise cost figure being assigned to the cost object $($one plane$).$ We will discuss the allocation process in more detail in the following two chapters; but for now, think of allocation as dividing up the total indirect costs between all of the units produced, just as you might divide a pizza among friends