If a business wants to use Time-Driven Activity-Based Costing (TDABC), then they will need to calculate the cost per transaction after determining their rate for supplying an activity. Which of the following represents the correct formula for calculating the cost per transaction?
A) Cost per minute for supplying an activity (under TDABC) - Number of minutes per transaction
B) Cost per minute for supplying an activity (under TDABC) / Number of minutes per transaction
C) Cost per minute for supplying an activity (under TDABC) + Number of minutes per transaction
D) Cost per minute for supplying an activity (under TDABC) × Number of minutes per transaction

Question

Quizplus · Accepted Answer

The formula to calculate cost per transaction is cost per minute for supplying an activity (under TDABC) × number of minutes per transaction. Choice D is the correct answer since that correctly multiplies the cost per minute for supplying an activity by the amount of time each transaction takes to get cost per transaction.

If a Business Wants to Use Time-Driven Activity-Based Costing (TDABC)