Activity-based costing
A) allocates overhead to activity cost pools, and it then assigns the activity cost pools to products and services by means of cost drivers.
B) accumulates overhead in one cost pool, then assigns the overhead to products and services by means of a cost driver.
C) assigns activity cost pools to products and services, then allocates overhead back to the activity cost pools.
D) allocates overhead directly to products and services based on activity levels.

Question

Quizplus · Accepted Answer

Activity-based costing allocates overhead to activity cost pools, which are then assigned to products and services based on the cost driver. This method allows for a more accurate allocation of overhead costs based on the specific activities that drive those costs. Options B, C, and D are incorrect as they do not follow the sequence of activity-based costing.

Activity-Based Costing