An activity-based cost (ABC) driver applies factory overhead to products or services according to the:
A) Activity output as measured by the units produced.
B) Activity level of hours of direct labor.
C) Resource demands/resource consumption of the firm's outputs (goods or services produced).
D) Budgeted activity level for the period.
E) Standard machine hours allowed for good output produced during the period.

Question

Quizplus · Accepted Answer

Activity-based costing is a cost allocation method that assigns costs to products or services based on the resources needed to produce them. Therefore, the ABC driver applies factory overhead to products or services according to the resource demands of the firm's outputs (goods or services produced), making choice C the best answer. Choices A, B, D, and E are incorrect because they do not consider the specific resources used in the production process.

An Activity-Based Cost (ABC) Driver Applies Factory Overhead to Products