Asked by Stecy Franck on Jul 16, 2024
Verified
A key difference between using multiple production department rates and activity-based costing is
A) the multiple production department rate method is used to distribute overhead costs to production activities and activity-based costing is used to distribute overhead costs to production departments
B) the multiple production department rate method is used to distribute overhead costs to production departments and activity-based costing is used to distribute overhead costs to production activities
C) the multiple production department rate method is used to distribute general and administrative costs to production departments and activity-based costing is used to distribute overhead costs to production activities
D) the multiple production department rate method is used to distribute general and administrative costs to production departments and activity-based costing is used to distribute general and administrative costs to production activities
Multiple Production Department Rates
Different overhead application rates used across various production departments to more accurately allocate costs.
Activity-Based Costing
A method of accounting that identifies and assigns costs to specific activities to better understand resource usage and profitability.
- Understand the fundamental characteristics and constraints of activity-based costing (ABC) and alternative methods for allocating overhead.
Verified Answer
AS
Alisson SimiyuJul 22, 2024
Final Answer :
B
Explanation :
The multiple production department rate method allocates overhead costs to different production departments based on department-specific rates, while activity-based costing (ABC) allocates overhead costs to specific activities that drive costs, aiming for more accurate product costing by tracing costs more directly to the activities that cause them.
Learning Objectives
- Understand the fundamental characteristics and constraints of activity-based costing (ABC) and alternative methods for allocating overhead.