Which formula best represents the first step used to allocate an indirect cost to a cost object?
A) Total cost to be allocated divided by cost driver
B) Cost driver divided by allocation rate
C) Cost driver divided by total cost to be allocated
D) Allocation rate divided by total cost to be allocated

Question

Quizplus · Accepted Answer

The first step to allocate an indirect cost to a cost object is to determine the cost driver, which is a variable that has a causal relationship with the indirect cost, and then calculate the cost driver rate by dividing the total cost to be allocated by the cost driver. Therefore, formula A represents the first step.

Which Formula Best Represents the First Step Used to Allocate