To Calculate an Activity Rate, the Practical Capacity of Each

question 54

True/False

To calculate an activity rate, the practical capacity of each activity must be determined.

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Definitions:

Overhead Absorption Rate

The rate at which indirect costs are allocated to produced goods or services.

ABC System

Activity-Based Costing; a method of assigning overhead and indirect costs to specific products or projects, based on their usage of activities.

Single-Base Allocation

A cost allocation method where overhead costs are distributed based on a single criterion or cost driver.

Cost Difference

The variance between the actual cost and the standard or expected cost of an item or activity.