Activity-based costing assigns overhead primarily on the basis of:
Correct answer: D. The activities that cause overhead costs
- A. A single plant-wide percentage
- B. The age of production equipment
- C. The selling price of finished goods
- D. The activities that cause overhead costs
Explanation
Activity-based costing identifies cost activities and assigns overhead using cost drivers that cause those activities. This can produce more accurate product costs than one broad allocation rate.
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About Cost Accounting
Cost accounting measures and analyses the cost of producing goods or providing services for planning, control and pricing decisions. It covers direct and indirect costs, fixed and variable costs, job and process costing, break-even analysis, marginal costing, overhead allocation, and the difference between product cost and period cost.
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