Question

Which best describes the flow of overhead costs in an activity-based costing system? a) Overhead costs → direct labor cost or hours → products b) Overhead costs → machine hours → products Overhead costs → products c) Overhead costs → activity cost pools → cost drivers → products

Answer 1

Answer:

c) Overhead costs → activity cost pools → cost drivers → products

Explanation:

Activity based costing is a type of system of costing in accounting where it is identified that in which overhead costs are assigned directly to products. Unlike the traditional methods, here the relationship between overhead costs and overhead activities is closely identified and linked to the end manufactured product.