In activity-based costing, the activity rate for an activity cost pool is computed by dividing the total overhead cost in the activity cost pool by:
A) the direct labor-hours required by the product.
B) the machine-hours required by the product.
C) the total activity for the activity cost pool.
D) the total direct labor-hours for the activity cost pool.

Question

Quizplus · Accepted Answer

The activity rate is calculated by dividing the total overhead cost in the activity cost pool by the total activity for the activity cost pool. This is because the activity rate is used to assign overhead costs to products based on the amount of activity they require, rather than simply based on direct labor-hours or machine-hours. Therefore, the correct answer is C.

In Activity-Based Costing, the Activity Rate for an Activity Cost