The allocation rate is calculated by:
A)Dividing the costs in the cost pool by the denominator volume.
B)Dividing the costs in the cost pool by the overhead costs.
C)Dividing the volume by the costs in the cost pool.
D)Dividing the overhead costs by the unit contribution margin.
E)Dividing the overhead costs by the profit margin.

Question

Quizplus · Accepted Answer

The allocation rate is calculated by dividing the costs in the cost pool by the denominator volume. This is because the cost pool represents the total cost to be allocated, and the denominator volume represents the basis for allocating those costs to individual products or services. Dividing the cost pool by the denominator volume gives us the allocation rate, which is then used to allocate the costs to the individual units of output.

The Allocation Rate Is Calculated By