In activity-based costing, which of the following describes how the activity allocation rate is computed?
A) The estimated total indirect cost of the activity divided by the estimated total quantity of cost allocation base
B) The estimated quantity of allocation base times the estimated total indirect cost of the activity
C) The estimated quantity of allocation base divided by the estimated total indirect cost of the activity
D) The estimated quantity of allocation base less the estimated total indirect cost of the activity

Question

Quizplus · Accepted Answer

The activity allocation rate in activity-based costing is computed by dividing the estimated total indirect cost of the activity by the estimated total quantity of the cost allocation base. This rate is then used to allocate costs to products or services based on their consumption of the activity.

In Activity-Based Costing, Which of the Following Describes How the Activity