Product costs are computed by:
A) dividing the cost driver rate by the number of units of the cost driver in each product.
B) multiplying the cost driver rate by the number of units of the cost driver in each product.
C) adding the cost driver rates of all products.
D) averaging the plantwide cost driver rate with the cost driver for each product.

Question

Quizplus · Accepted Answer

Product costs are computed by multiplying the cost driver rate by the number of units of the cost driver in each product. This represents the direct relationship between the cost driver and the product cost. Dividing the cost driver rate by the number of units of the cost driver in each product (A) would give a nonsensical result, while adding the cost driver rates of all products (C) and averaging the plantwide cost driver rate with the cost driver for each product (D) do not reflect the specific cost drivers for each product.

Product Costs Are Computed By