The formula that is used to allocate indirect costs to a chosen cost driver is:
A) cost pool divided by indirect costs.
B) indirect costs divided by cost pool.
C) indirect costs divided by cost driver usage.
D) cost driver usage divided by indirect costs.

Question

Quizplus · Accepted Answer

The formula used to allocate indirect costs to a chosen cost driver is the indirect costs divided by cost driver usage. This is because indirect costs are allocated based on the extent of usage of the cost driver, which is typically a variable such as labor hours or machine hours. Therefore, the formula uses the indirect costs as a numerator and the usage of the chosen cost driver as a denominator to allocate the indirect costs accurately.

The Formula That Is Used to Allocate Indirect Costs to a Chosen