When using an activity-based costing system,which of the following is the formula for allocating costs to products or services?
A)Activity rate x activity driver consumption
B)Activity rate x amount in activity pool
C)Predetermined manufacturing overhead rate x actual activity
D)Predetermined manufacturing overhead rate x planned activity

Question

Quizplus · Accepted Answer

The formula for allocating costs to products or services in an activity-based costing system is the activity rate multiplied by the activity driver consumption. This is because activity-based costing focuses on the consumption of activities as the key driver of costs, rather than direct labor or machine hours used in traditional costing systems. The activity rate is calculated by dividing the total cost of an activity pool by the total units of the activity driver consumed. Therefore, option A is the correct formula for allocating costs in an activity-based costing system.

When Using an Activity-Based Costing System,which of the Following Is