Which of the following is a cost pool used with the activity-based costing method?
A) total selling and administrative overheads
B) direct material dollars
C) total factory overheads
D) production setups

Question

Quizplus · Accepted Answer

Production setups are a common cost pool used with activity-based costing. This is because the cost of setup activities is not always proportional to the volume of production, so it is difficult to allocate these costs using traditional methods like direct labor or machine hours. Activity-based costing allows for a more accurate allocation of setup costs by identifying the specific activities that contribute to setup time and assigning costs accordingly. Choice A is incorrect because total selling and administrative overheads are typically not associated with production activities and may be allocated separately. Choice B is incorrect because direct material dollars are not a cost pool themselves but may be included in the cost of goods sold calculation. Choice C is incorrect because total factory overheads may be allocated using activity-based costing, but this is a more general category that includes many different types of costs, such as utilities, rent, and depreciation.

Which of the Following Is a Cost Pool Used with the Activity-Based