The activity-rate method involves:
A)dividing the total activity driver by the total activity cost.
B)calculating the proportion of each activity driver used by each product.
C)calculating an activity rate that is similar to the predetermined overhead rate.
D)multiplying the total activity cost by the total activity driver.

Question

Quizplus · Accepted Answer

The activity-rate method involves calculating an activity rate that is similar to the predetermined overhead rate. This activity rate is then used to allocate overhead costs to products based on their usage of specific activity drivers. Option A involves dividing the total activity driver by the total activity cost which is not correct. Option B involves calculating the proportion of each activity driver used by each product but it does not involve determining the activity rate. Option D involves multiplying the total activity cost by the total activity driver which is also not correct.

The Activity-Rate Method Involves