What is the 80-20 rule used when selecting cost allocation bases for the budgeted overhead rate?
A) 80% of the cost-allocation bases drive 20% of the overhead costs
B) 20% of the cost-allocation bases drive 80% of the overhead costs
C) 80% of the overhead rate is determined by 20% of the cost-allocation bases
D) 20% of the overhead rate is determined by 80% of the cost-allocation bases

Question

Quizplus · Accepted Answer

The 80-20 rule suggests that 20% of the cost-allocation bases are responsible for 80% of the overhead costs. Therefore, selecting these key cost-allocation bases as the basis for the budgeted overhead rate can result in a more accurate allocation of overhead costs to products or services.

What Is the 80-20 Rule Used When Selecting Cost Allocation