What Is the 80-20 Rule Used When Selecting Cost Allocation

question 35

Multiple Choice

What is the 80-20 rule used when selecting cost allocation bases for the budgeted overhead rate?

• A) 80% of the cost-allocation bases drive 20% of the overhead costs
• B) 20% of the cost-allocation bases drive 80% of the overhead costs
• C) 80% of the overhead rate is determined by 20% of the cost-allocation bases
• D) 20% of the overhead rate is determined by 80% of the cost-allocation bases

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Definitions:

Capital Market

The capital market is a financial market where long-term debt or equity-backed securities are bought and sold, providing businesses and governments with a platform to raise funds for long-term investments.

Marginal Productivity

The additional output that is produced by utilizing one more unit of a variable input, holding all other inputs constant.

Marginal Product

The additional output produced by employing one more unit of a particular input, holding other inputs constant.

Rental Price

The cost associated with leasing or renting an asset, property, or service.