An activity-based overhead rate is computed as follows:

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7)
an activity-based overhead rate is computed as follows:
a.
actual overhead divided by actual use of cost drivers.
b.
estimated overhead divided by actual use of cost
drivers.
c.
actual overhead divided by estimated use of cost drivers
d.
estimated overhead divided by estimated use of cost
drivers.
8)
identifying and classifying activities is the:
a.
first step under ABC
b.
last step under ABC.
c.
second step under ABC
d.
None of these answers is correct.

Answer

7. The right option is “d. Estimated overhead divided by
estimated use of cost drivers”.

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Activity based overhead rate is calculated using the estimations
made by the management of the company. Therefore, all the data will
be based on estimation which is given only in option d.

8. The right option is “a. First step under ABC “.

Under ABC, the main area is to identify and classify the
activities as they are the basis to be used to determine the
allocation of overheads. The overhead costs are allocated to these
activities based on the number of times the activities ate
performed. If there are no activities then there will be no basis
to allocate the overheads. This makes it the first step of ABC.

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