A hierarchy of bounding volumes for objects is generated for use during ray tracing. The hierarchy of bounding volumes improves image quality and well as processing time during rendering. A memory cost factor is identified that relates to the increase in the amount of memory for a subdivided volume compared to its undivided form. An estimate is made of the average number of surface intersections made with a ray passing through the undivided volume and the divided volume, and a factor is evaluated that measures the reduction in such intersections resulting from the subdivisions. A comparison between the memory cost factor and the intersection reduction factor determines whether or not a bounding volume is further subdivided. These tests are then applied recursively to the newly created bounding volumes.