The key to allocating overhead costs is the determination of the:

Question

Quizplus · Accepted Answer

The cost driver is the factor that most closely relates to the occurrence or level of the overhead cost. Therefore, determining the right cost driver is essential to accurately allocating overhead costs to products or services. Option A is incorrect since overhead costs are already known and allocated to departments or activities; option C refers to direct costs that can be directly traced to a particular product, while option D pertains to the total cost of a product, including direct materials and labour, as well as overhead costs.

The Key to Allocating Overhead Costs Is the Determination of The