Question

During step 3 of activity-based costing, activity overhead cost pool rates are used to assign overhead costs to final cost objects. Proper determination of activity rates depends on all of the following: (Check all that apply).
A. Proper determination of factor which drive cost
B. Proper measurement of activities

Answer 1

Answer:

Proper determination of activity rates depends on the following :

A. Proper determination of factor which drive cost

B. Proper measurement of activities

Explanation:

Predetermined Activity Rates = Overhead Cost / Total Cost Driver units

Thus it is important to measure correctly the overheads incurred for each Activity that exist that accumulated overheads.

It is also important to determine correct cost drivers for those overheads identified to absorb costs correctly into outputs.

Answer 2

Proper determination of activity rates depends on the following :

A. Proper determination of factor which drive cost.

B. Proper measurement of activities.

What is the predetermined activity rate:

We know that

Predetermined Activity Rates = Overhead Cost / Total Cost Driver units

It should be calculated by dividing the cost of overhead from the total cost driver units. It is vital for determining the overhead amount in the current manner also the correct cost drivers should be measured so that the cost should be absorbed.

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