To assign overhead costs to each product, the company
A)multiplies the activity-based overhead rates per cost driver by the number of cost drivers expected to be used per product.
B)multiplies the overhead rate by the number of direct labor hours used on each product.
C)assigns the cost of each activity cost pool in total to one product line.
D)multiplies the rate of cost drivers per estimated cost for the cost pool by the estimated cost for each cost pool.

Question

Quizplus · Accepted Answer

Activity-based costing (ABC) involves assigning overhead costs to products based on the activities that go into producing them. To do this, the company first identifies the cost drivers for each activity (such as machine setups, inspections, or customer orders). Then, it calculates an overhead rate for each activity based on its total cost and the number of cost drivers expected to be used. Finally, it multiplies the overhead rates with the number of cost drivers used by each product. This gives a more accurate picture of the true cost of each product and helps managers make better decisions regarding pricing, production, and profitability.

To Assign Overhead Costs to Each Product, the Company