The budgeted indirect-cost rate for each cost pool is computed as ________.
A) budgeted annual indirect costs divided by budgeted annual quantity of cost allocation base
B) budgeted annual quantity of cost allocation base divided by budgeted annual indirect costs
C) actual annual indirect costs divided by budgeted annual quantity of cost allocation base
D) budgeted annual indirect costs divided by budgeted actual quantity of cost allocation base

Question

Quizplus · Accepted Answer

The budgeted indirect-cost rate for each cost pool is computed as budgeted annual indirect costs divided by budgeted annual quantity of cost allocation base. This calculation helps to determine the indirect cost that can be allocated to the cost objects depending on the level of activity. Option B is the inverse of this calculation and is incorrect. Option C uses actual annual indirect costs, which is not relevant when computing the budgeted indirect-cost rate. Option D involves dividing the budgeted indirect costs by the budgeted actual quantity of cost allocation base, which is also not a relevant calculation.

The Budgeted Indirect-Cost Rate for Each Cost Pool Is Computed