Activity rates are determined by
A) dividing the actual cost for each activity pool by the actual activity base for that pool.
B) dividing the cost budgeted for each activity pool by the estimated activity base for that pool.
C) dividing the actual cost for each activity pool by the estimated activity base for that pool.
D) dividing the cost budgeted for each activity pool by the actual activity base in that pool.

Question

Quizplus · Accepted Answer

Activity rates are calculated by dividing the cost budgeted for each activity pool by the estimated activity base for that pool. This provides a predetermined rate that can be used to allocate costs to products or services based on their actual usage of the activity base. Option A is incorrect as it uses actual cost instead of budgeted cost. Option C uses estimated activity base which is not accurate as the actual activity base may vary. Option D uses actual activity base instead of budgeted activity base.

Activity Rates Are Determined by