Final answer:
The correct calculation to allocate costs is 2. Activity rate × Activity driver consumption, used in activity-based costing to accurately assign costs based on resources consumed by products or services.
Step-by-step explanation:
The calculation used to allocate costs is Activity rate × Activity driver consumption. In cost accounting, specifically in activity-based costing (ABC), costs are allocated to products or services based on the resources they consume. This involves identifying the cost drivers that cause costs to change and using them to assign the costs of activities to the products or services responsible for incurring those costs. For instance, if a company wants to determine the cost of its manufacturing process for each unit produced, it would take the activity rate which is the cost per unit of activity and multiply it by the activity driver consumption, which is the amount of activity used by the product. This calculation helps businesses in accurately assigning costs to their products, thereby aiding in pricing, budgeting, and financial analysis.
The correct calculation used to allocate costs is 1) Activity rate ÷ Activity driver consumption. This calculation involves dividing the activity rate by the consumption of the activity driver. The activity rate represents the cost of the activity, while the activity driver measures the consumption or usage of the activity. Dividing the activity rate by the activity driver consumption allows for a more accurate allocation of costs based on the level of activity.