Home › US CMA Part 1 › Management Accounting › Activity-Based Costing › Activity-based costing assigns overhead to produ…
Activity-based costing assigns overhead to products based on the various:
AActivities that drive costs
BAuditors that review costs
CInvestors that supply funds
DCustomers that place orders
Answer & Solution
Correct answer: A. Activities that drive costs
1. Overhead has to be attached to products by some rule.
2. Activity-based costing is the process that assigns overhead to products.
3. It does so based on the various activities that drive overhead costs.
4. The activities, not the auditors or investors, decide the split.
_Source: OpenStax Principles of Accounting Volume 2, Managerial Accounting (CC BY-NC-SA 4.0), Ch 6 'Activity-Based, Variable, and Absorption Costing', sections 6.1-6.5_
Related questions
Moving to activity-based costing tends to change the per-unit cost of low-volume products One stated disadvantage of activity-based costing is that the method is:When the entire finished goods inventory is sold, net income under the two methods is:Fixed overhead is $12,000 and 10,000 units are made. Under absorption costing each unit caWhy is activity-based costing described as a more accurate way of allocating overhead?In the five stages of activity-based costing, activity rates are calculated for each:Absorption costing applies all direct costs, fixed overhead and variable overhead to the:Under variable costing, fixed overhead costs are treated in which way?