After a company has successfully determined their activity-based rate, what steps must be taken to allocate Manufacturing Overhead (MOH) for an activity?
A) Divide the activity-based rate by the actual quantity of cost driver used
B) Divide the activity-based rate by the budgeted quantity of cost driver used
C) Multiply the activity-based rate by the actual quantity of cost driver used
D) Multiply the activity-based rate by the budgeted quantity of cost driver used

Question

Quizplus · Accepted Answer

This question requires you to consider how a company would complete Step 3 of implementing activity-based costing. In order to allocate the MOH for activity, you must multiply the activity-based rate by the actual quantity of cost driver used (Choice C). Choice D is incorrect as it includes the budgeted quantity of cost driver used rather than actual. Choice A is incorrect as it divides rather than multiplies the two numbers. Choice B is incorrect as it incorporates division rather than multiplication, and it uses the budgeted rather than the actual quantity of the cost drivers.

After a Company Has Successfully Determined Their Activity-Based Rate, What