In activity-based costing, a separate activity rate (i.e., predetermined overhead rate)is computed for each activity cost pool by dividing the estimated overhead cost in the activity cost pool by the total expected activity for the activity cost pool.

Question

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This statement is correct. An activity rate is calculated for each activity cost pool by dividing the total estimated overhead cost in the pool by the total expected activity in that cost pool. This helps to assign overhead costs more accurately to products or services based on the activities they require.

In Activity-Based Costing, a Separate Activity Rate (I