Question

In activity-based costing, the total estimated units of the allocation base for an activity cost pool can be computed by:

A )Dividing the activity cost pool's allocation rate by the total estimated machine hours required to meet the budgeted level of production.
B )Multiplying the total estimated overhead costs in the activity cost pool by the activity cost pool's allocation rate.
C) Dividing the total estimated overhead costs in the activity cost pool by the activity cost pool's allocation rate.
D) Multiplying the activi cost pool's allocation rate by the total estimated direct labor hours required to meet the budgeted level of production.
E) None of the above.

Answer 1

In activity-based costing, the total estimated units of the allocation base for an activity cost pool can be computed by dividing the activity cost pool's allocation rate by the total estimated machine hours required to meet the budgeted level of production.

Step-by-step explanation:

In activity-based costing, the total estimated units of the allocation base for an activity cost pool can be computed by:

A) Dividing the activity cost pool's allocation rate by the total estimated machine hours required to meet the budgeted level of production.

B) Multiplying the total estimated overhead costs in the activity cost pool by the activity cost pool's allocation rate.

C) Dividing the total estimated overhead costs in the activity cost pool by the activity cost pool's allocation rate.

D) Multiplying the activity cost pool's allocation rate by the total estimated direct labor hours required to meet the budgeted level of production.

E) None of the above.

The correct answer is A) Dividing the activity cost pool's allocation rate by the total estimated machine hours required to meet the budgeted level of production. This is because the allocation base for an activity cost pool in activity-based costing is often expressed in terms of a measure of activity, such as machine hours, and the total estimated units can be computed by dividing the activity cost pool's allocation rate by the total estimated machine hours required for production.