In an activity-based costing system, overhead costs are divided into separate:
A)Cost objects.
B)Activity cost pools.
C)Resource consumption and activity consumption cost drivers.
D)Product-line cost pools.
E)Plantwide or departmental cost pools.

Question

Quizplus · Accepted Answer

In an activity-based costing system, overhead costs are divided into separate activity cost pools based on the different activities that drive those costs. This allows for a more precise allocation of costs to specific cost objects (such as products or customers) based on the amount of activity consumed by each. Option A is incorrect because cost objects are what receive the allocation of overhead costs, not what overhead costs are divided into. Option C is partially correct, as activity consumption cost drivers are used to allocate costs, but resource consumption cost drivers are not relevant to dividing overhead costs into activity cost pools. Options D and E are incorrect because they refer to different methods of categorizing cost pools, which are not relevant to the question of how overhead costs are divided in an activity-based costing system.

In an Activity-Based Costing System, Overhead Costs Are Divided into Separate