Overhead costs are allocated to cost objects in an activity-based costing system in the following manner:
A)Overhead costs are traced to departments,then costs are traced to products.
B)Overhead costs are traced to activities,then costs are traced to products.
C)Overhead costs are traced to activities,then costs are traced to departments and then allocated to products.
D)Overhead costs are traced from resources to cost objects.

Question

Quizplus · Accepted Answer

In an activity-based costing system, overhead costs are allocated to cost objects (such as products) by tracing the costs to activities that are required to produce or support those cost objects. This is the most accurate method of assigning overhead costs, as it takes into account the specific activities that are driving those costs. Once the costs are traced to activities, they can be allocated to cost objects based on the amount of activity required for each object.

Overhead Costs Are Allocated to Cost Objects in an Activity-Based