After all activity costs are accumulated in an activity cost pool account, overhead rates are computed and costs are allocated to cost objects based on:
A) Indirect factors.
B) Opportunity cost principles.
C) Cost drivers.
D) Joint cost principles.
E) Direct factors.

Question

Quizplus · Accepted Answer

Overhead rates are computed based on cost drivers, which are the factors that cause or influence the cost of an activity. Cost drivers can be different for different activities, and they are used to allocate costs from the activity cost pool to cost objects such as products, services, customers, or departments. Indirect factors, opportunity cost principles, and joint cost principles are not directly related to the allocation of overhead costs. Direct factors are related to direct costs, not overhead costs.

After All Activity Costs Are Accumulated in an Activity Cost