The overhead application rate is lower when an activity-based-costing approach is used than when a traditional approach is used because _____.
A)less costs are incurred
B)more costs are directly traced
C)costs are spread over more value-chain activities
D)non-value-added costs are eliminated

Question

Quizplus · Accepted Answer

Activity-based costing approach involves tracing overhead costs directly to the activities that cause them, resulting in a more accurate allocation of overhead costs. Therefore, the overhead application rate will be lower as more costs are directly traced to specific activities, rather than being spread over a broader range of activities as in a traditional approach.

The Overhead Application Rate Is Lower When an Activity-Based-Costing Approach