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.