Final answer:
Direct costs are allocated using predetermined direct-cost rates multiplied by the actual consumption of resources. Fixed costs, such as rent, remain constant, while variable costs vary with output levels. Total spending considers these costs, especially in the context of inflation measurement.
Step-by-step explanation:
Both methods allocate direct costs to a cost object the same way: by using predetermined direct-cost rates times actual consumption. In accounting, the marginal cost of the first unit of output is always equated with the total cost. When breaking down costs, we often separate them into fixed and variable costs. Fixed costs, like rent on a factory, remain constant regardless of the production level. Variable costs, on the other hand, fluctuate with the level of output. Total spending is affected by these costs and is a critical factor when measuring inflation through the analysis of the dollar cost of a basket of goods over time.