An Activity-Based Costing System Allocates Factory Overhead Rates to Products

question 18

Multiple Choice

An activity-based costing system allocates factory overhead rates to products or services using:

• A) a single plantwide overhead rate.
• B) the cost of activities based on an activity rate times the number of activity-based usage quantities.
• C) an allocation of budgeted revenues produced by a product or service.
• D) an end-of-year allocation of costs to products or services.

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Definitions:

Standard Costs

A predetermined cost of manufacturing, distributing, or selling products or services, which is used for budgeting and assessing performance.

Manufacturing Overhead

The indirect costs associated with manufacturing, not directly assignable to a specific product, such as factory rent, utilities, and equipment maintenance.

Cash Account

An account that records cash transactions, including cash received and cash paid out, within a business.

Direct Labor

The wages of employees who are directly involved in the production of goods or delivery of services.