When using an activity-based costing system, which of the following is the formula for allocating costs to products or services?
A)Activity rate × activity driver consumption
B)Activity rate × amount in activity pool
C)Predetermined manufacturing overhead rate × actual activity
D)Predetermined manufacturing overhead rate × planned activity

Question

Quizplus · Accepted Answer

Activity-based costing allocates costs to products or services based on the consumption of activity drivers. The formula for allocating costs under activity-based costing is activity rate (cost per unit of activity) multiplied by the consumption of the activity driver by each product or service. Therefore, the formula for allocating costs to products or services is activity rate × activity driver consumption.

When Using an Activity-Based Costing System, Which of the Following