Activity-Based Costing

question 30

Multiple Choice

Activity-based costing

• A) allocates overhead to activity cost pools, and it then assigns the activity cost pools to products and services by means of cost drivers.
• B) accumulates overhead in one cost pool, then assigns the overhead to products and services by means of a cost driver.
• C) assigns activity cost pools to products and services, then allocates overhead back to the activity cost pools.
• D) allocates overhead directly to products and services based on activity levels.

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Definitions:

Indirect Expense

Costs that are not directly traceable to a specific product, service, or department, but are necessary for the business to operate.

Total Direct Cost

The sum of all direct costs associated with the production of goods or the provision of services, including direct materials and direct labor.

Departments

Departments refer to distinct segments within an organization, each with specific responsibilities and roles, meant to streamline operations and improve efficiency.

Expenses

Costs incurred by a business in the process of earning revenue.